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2009 DIGILAW 816 (KAR)

Commissioner of Income Tax v. Pranam Metals

2009-10-29

S.N.SATYANARAYANA, V.G.SABHAHIT

body2009
JUDGMENT V.G. Sabhahit, J.—This appeal by the Revenue is filed being aggrieved by the order passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji in I. T. A. No. 34/PANJ/2006 wherein the Tribunal has allowed the appeal filed by the assessee and set aside the penalty imposed upon the assessee under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). 2. The assessee which is a partnership firm filed returns during the year 1997-98 showing sale of Rs. 4,00,000 to M/s. Rajesh Industries and on assessment it was found that the sale of Rs. 4,00,000 to M/s. Rajesh Industries was shown in the return. However, in the closing stock of M/s. Rajesh Industries these goods were not shown. Under the circumstances, assessment order was passed considering the sale of Rs. 4,00,000 as bogus and made addition which was confirmed. Being aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Belgaum and the appellate authority by order dated November 21, 2005 confirmed the order of the Assessing Officer. Being aggrieved by the same the assessee preferred an appeal before the Income Tax Appellate Tribunal, Panaji Bench (hereinafter referred to as "the Tribunal") and the Tribunal considered the said appeal along with I. T. A. No. 35/PANJ/2006 and by a common order dated February 13, 2006, held that there was no mala fide intention in suppressing the said income in view of the decision of the hon'ble Supreme Court in the case of Union of India (UOI) and Others Vs. Dharamendra Textile Processors and Others, (2008) 306 ITR 277 SC wherein it has held that mens rea was necessary and accordingly set aside the penalty imposed and allowed the said appeal by order dated February 13, 2006. Being aggrieved by the same, this appeal is preferred by the Revenue and the appeal was admitted on July 2, 2007, for the consideration of the following substantial question of law: Whether the Tribunal was correct in deleting the penalty under Section 271(1)(c) by holding that rectification entries were passed subsequently and the goods were taxed during the assessment year 1997-98 in the hands of M/s. Rajesh Industries which is contrary to the facts of the case; since the assessee and M/s. Rajesh Industries did not file revised returns subsequent to rectification of account entries and consequently recorded a perverse finding ? 3. Heard learned Counsel appearing for the appellants. Though notice has been served, the respondent has not chosen to appear before the court. 4. Learned counsel appearing for the appellants submitted that the order passed by the Tribunal impugned in this appeal is perverse and arbitrary as there is no finding that the explanation given by the assessee falls within any of the Explanations mentioned in Section 271(1)(c) and in the absence of the said finding by the fact finding authority on the question of fact, i.e., the Tribunal and in the case of Union of India (UOI) and Others Vs. Dharamendra Textile Processors and Others, (2008) 306 ITR 277 SC the hon'ble Supreme Court has laid down that in respect of the provisions pertaining to imposition of mandatory penalty, persons who evaded payment of tax, the said provision cannot be read to contain mens rea as an essential ingredient and there is no discretion to the authority competent to levy penalty below the prescribed minimum. We have given careful consideration to the submission of the learned Counsel appearing for the appellants and scrutinised the material on record. A perusal of the impugned order passed by the Tribunal clearly shows that the Tribunal has proceeded mainly on the basis that it was necessary to prove that there was a mala fide intention on the part of the assessee for imposing penalty. The said reasoning cannot be sustained in view of the decision of the hon'ble Supreme Court in Union of India (UOI) and Others Vs. Dharamendra Textile Processors and Others, (2008) 306 ITR 277 SC referred to above. 5. Further, it is also clear from the perusal of the impugned order passed by the Tribunal that the Tribunal being the final authority on the question of fact has not given any finding as to whether the explanation that is submitted by the assessee in response to the notice for imposition of penalty under Section 271(1)(c) falls within Explanations 1 to 7 contained in the said section and unless there is anything to that effect, the question of setting aside the imposition of penalty by the Assessing Officer which has been confirmed by the appellate authority would not arise and wherefore, the order passed by the Tribunal is perverse and arbitrary and cannot be justified and the substantial question of law is answered in favour of the Revenue. Since this Court cannot go into the question of fact, it would be appropriate if the matter is remitted to the Tribunal to consider the same in accordance with law. Accordingly, we answer the substantial question of law in favour of the Revenue and passing the following order: 6. The appeal is allowed. The order dated February 23, 2006 passed by the Tribunal in I. T. A. No. 34/PANJ/2006 is set aside and the said appeal is remitted to the Income Tax Appellate Tribunal, Panaji Bench for fresh disposal in accordance with law.