IN THE ITAT PUNE BENCH ‘A’
Emilio Ruiz Berdejo
versus
Deputy Commissioner of Income-tax
IT Appeal Nos. 991 (Pune) of 2008
[Assessment years 2000-01 to 2005-06]
July 24, 2012
ORDER
1. Issue in all these appeals pertain to Penalty u/s.271(1)(c) with regards to offering the additional income on account of reimbursement towards tax rationalization as a taxable perquisite in response to notice u/s.148 of the Act. So they are being disposed off by a common order for the sake of convenience.
2. In ITA.No.991/PN/2008 for A.Y. 2000-01, the assessee raised the following grounds:
“1. That on the facts and in the circumstances of the appellant’s case, the learned Commissioner of Income-tax(Appeals)[CIT(A)] erred in upholding the levy of penalty under section 271(1)(c) of the Income Tax act 1961 (the ‘Act’). The CIT(A) ought to have held that no penalty was leviable, on the facts and in law.
2. That on the facts and in the circumstances of the appellant’s case, the CIT(A) erred in holding that the appellant concealed the particulars of his income and evaded assessment of his correct income.
3. The CIT(A) erred in not accepting the appellant’s contention to the effect that the appellant had bonafide believed that the additional income declared by him in his return was not liable to Indian taxation.
4. The CIT(A) erred and acted on the basis of conjecture, suspicion and surmises and contrary to the record in alleging that ‘it was only as a result of issuance of a notice u/s.148 by the Assessing Officer that the appellant was cornered to disclose his true and correct state of affairs.
5. The CIT(A) erred in alleging that the additional income was not voluntarily disclosed by the appellant.
6. The CIT(A) erred and acted on the basis of conjecture, suspicion and surmises and without any material in alleging that the appellant ‘kept on hiding his unreported income’ even after the issue of the notice u/s.148.
7. The order of the CIT(A) is vitiated inter alia by errors of fact and law and on account of its being based on conjecture, suspicion and surmises and allegations never put to the appellant in the course of the hearing of the appeal.
8. That on the facts and in the circumstances of the appellant’s case, the learned CIT(A) erred in holding that it was a fit case for levy of penalty at the rate of 150% of the tax sought to be evaded.”
3. The assessee is an employee of Tetra Pak International S.A., and has been deputed to India for working with Tetra Pak India Ltd. The assessee filed his return of income on 30.06.2000 declaring total income of Rs. 35,47,950/-. In fact the assessee has received certain amounts outside India from Tetra Pak International S.A. which he did not disclose in the original return of income filed by him. The amount not disclosed in the return of income was Rs. 87,86,620/-. Since the assessee did not disclose this income to the extent of Rs. 87,86,620/-, the Assessing Officer was of the view that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. Accordingly, he issued notice u/s.148 which was served on the assessee on 17.11.2006. In response to the notice u/s.148, the assessee filed return of income on 26.06.2007 showing total income of Rs. 1,23,34,570/- including income of Rs. 87,86,620/- not reported in original return of income. Assessment was completed by the Assessing Officer at total income of Rs. 1,23,34,570/-. Consequently, the penalty proceedings u/s. 271(1)(c) were also initiated.
4. During penalty proceedings, the explanation furnished by the assessee in response to a show cause notice issued by the Assessing Officer requiring the assessee to explain as to why penalty u/s. 271(1)(c) be not levied, did not find favour with the Assessing Officer who was of the view that additional income of Rs. 87,86,620/- has been disclosed by the assessee in return filed in response to notice u/s. 148 of the Act and same was not offered to tax in original return of income. Thus, according to the Assessing Officer, the intention of the assessee was to conceal the income received from Tetra Pak International S.A. The Assessing Officer, therefore, held that assessee was liable for imposition of penalty u/s. 271(1)(c) for concealment of particulars of income and accordingly levied penalty of Rs. 43,49,376/- being 150% of tax sought to be evaded. Matter was carried before the first appellate authority, who confirmed the same. Same has been opposed before us.
5. Before us, the Ld. Authorised Representative pointed out that appeal in assessee’s own case in 1st round was decided in his favour by the ITAT in ITA No.991/PN/2008 wherein vide paras 26 to 31, ITAT has decided the issue in favour of assessee by observing as under:
“26. We have already given a finding that the assessee’s explanation for not disclosing the income in question in his returned income is duly evidenced by the material on record and, as such, deserves to be accepted. We have also held that in the absence of categorical conclusions about taxability of an income, particularly when the said income is taxed only on the basis of assessee’s suo motu declaration and when, despite this declaration, the assessee has categorically challenged the taxability, a concealment penalty cannot be imposed. In these circumstances, it is not really necessary to go into the question whether or not there was any mens rea in the conduct of the assessee. That aspect of the matter, in this case, is somewhat academic. However, suffice to say that as held by the Hon’ble Supreme Court, in the case of Dilip N Shroff (supra), “before a penalty can be imposed, the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represent income and that the assessee consciously concealed the particulars of his income or had furnished inaccurate particulars thereof”. While in Dharmendra Textiles (supra), doubts have been expressed on correctness of this judgment, the expression of doubts, by itself, does not dilute binding nature of Dilip N. Shroff (supra) judgement. It is still good law and binding on all of us under Article 141 of the Constitution of India.
27. As held by a three judge bench in the landmark case of Hindustan Steel Limited (supra), “penalty will not be imposed merely because it is lawful to do so” and “whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances”.
28. Bearing in mind this broad principle, let us take one more look at the facts of the case. The sequence of events in this case shows that merely because the Income tax return was filed after issuance of reassessment notice to bring to tax the income escaping assessment, it does not imply that the assessee withheld any information. As a matter of fact this notice could be issued only on the basis of information furnished, alongwith details of taxes paid, by the employer. The evidence on record shows that the assessee’s employer, rightly or wrongly, was actually of the view that the income not shown in the original return was not exigible to tax. In our considered view, on above facts, it was indeed not a fit case for imposition of penalty.
29. Hon’ble Supreme Court has, in the case of Dilip N. Shroff (supra), also approved the judgments of Hon’ble Delhi High Court in the cases of CIT v. Ram Commercial Limited (246 ITR 568) and Diwan Enterprises v. CIT (246 ITR 571) which require that the Assessing Officer must form his opinion and record his satisfaction before initiating the penalty proceedings. There is no such specific recording of satisfaction in this case. For this reason also, the impugned penalty order is vitiated in law.
Outcome of the appeal:
30. In the light of the above discussions, we are of the considered view that the impugned penalty is fit to be quashed. We, therefore, direct the Assessing Officer to delete the same. The assessee gets the relief accordingly.
31. In the result, the appeal is allowed. Pronounced in the open court today on 29th day of August 2008.”
5.1. Matter was carried before the jurisdictional High Court wherein the first appellant’s name in this group cases appeared at Income Tax Appeal No.2529/2009, wherein a group case, Hon’ble jurisdictional High Court has restored the issue to Tribunal by observing as under:
“1. Learned Counsel for the appellant and learned counsel for the respondents have jointly tendered minutes of order. The same are taken on record and marked ‘X’ for identification.
2. All the appeals are disposed of in terms of minutes of order with no order as to costs.
MINUTES OF THE ORDER
Both the parties agree that the appeals should be restored to the Tribunal for fresh adjudication in view of the Tribunal’s erroneous reference to section 273B of the Act in view of the subsequent decision of a three judge Bench of the apex Court in Dharamendra Textile’s case (306 ITR 207) and other judgments, rendered after the date of the judgment of the Tribunal which the Tribunal did not have the occasion to consider. Both parties agree that all issues and contentions are left open.
