TaxTMI 
TaxTMI 
2018 (8) TMI 990
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.... Lunch Home. (ii) The respondent assessee filed return of income for the assessment year 2001 02, declaring total income of Rs. 14,68,830/-. The case of the respondent assessee was was selected for scrutiny assessment and notice under Section 143(2) was issued and served on the respondent assessee. 3. By an order of assessment dated 31.03.2004, the Assessing Officer made the following additions/disallowances resulting in assessed income of Rs. 1,04,77,36/-, and initiated separate penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961, hereinafter referred to as the said Act . Sl.No. Addition/ Disallowance Amount Amount Income admitted 14,68,830 1 Loan obtained in 1988-89 inclusive of interest that was shown as gift in assesse's capital account 40,80,000 2 Loan from creditors added as unexplained Cash Credits u/s 68 for want of confirmation & where no interest was paid. 39,62,212 3 Rental income from group company - added (After allowing deduction u/s 24(1) of Rs. 2,25,000/-) 6,75,000 4 ....
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.....1313/Mds/2006, was heard along with an appeal, being ITA.No.107/Mds/2006, from an order of the CIT (Appeals) confirming the order of the assessment for the assessment year 2001-02. 8. By a common order dated 05.8.2016, which is under appeal before us, the learned Tribunal, inter alia, dismissed the Revenue's appeal holding that the CIT (Appeals) had rightly deleted the penalty. The learned Tribunal held: "8. As rightly submitted by ld. Counsel for the assessee, the assessee has received loan from non-resident Indian after obtaining necessary approval from RBI. A sum of Rs. 40,60,000/- was converted into gift subsequently. From the very same person, the assessee has received a cash credit of Rs. 39,62,000/-. Since the assessee has received the money after getting necessary approval from RBI, it is not correct to say that the identity and creditworthiness of the creditor is not proved. This Tribunal is of the considered opinion that merely because an addition was made in the assessement proceedings that will not result automatically in levy of penalty u/s 271(1)(c) of the Act. The Assessing Officer has to re-appreciate the material available on record. This Tribunal ....
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....ough the funds had come through banking channels, it was not known whether there existed any real person by the name of Mr.Ittiachan and even if he existed, it was not known whether he was capable of giving Rs. 50 lakhs as loan in the previous years relevant to assessment year 1988 89 and 1989 90 or Rs. 91.50 lakhs as gift in the previous year 1992-93. 14. Counsel argued that no documents had been filed to prove repayment of loan or payment of interest to the non-resident Indian lender Mr.Ittiachan, though in the grounds of appeal before the CIT (Appeals) it was contended that the loan had been repaid with interest and the gift had been received subsequently. 15. Counsel submitted that the respondent had not even given the correct and complete address of Mr.Ittiachan before the Assessing Officer or the Commissioner of Income Tax (Appeals), or the learned Tribunal. 16. Counsel for the Revenue submitted that the respondent had not furnished details of the unsecured loans as on 31.03.2001 and no confirmation letters had been filed. It was for the respondent assessee to prove and establish the identity of the creditors, the credit worthiness and genuineness of the transactions....
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.... Authorities. The only issue that arose for consideration during the assessment year under consideration is with regard to the transfer of entries from loan to gift account which act was rejected by the Assessing Officer and such rejection would not automatically lead to the conclusion of concealment of income or furnishing inaccurate particulars of income. 24. Citing the decision of the Bombay High Court in the case of Commissioner of Income Tax vs. Nayan Builders and Developers, reported in (2014) 89 CCH 0187 (Mumbai) and the decision of the Karnataka High Court in the case Commissioner of Income Tax v. Ankita Electronics Pvt. Ltd., reported in (2015) 379 ITR 0050 (Karn), counsel argued that mere admission of the substantial question of law formulated in the appeal against the deletions would justify the plea for deletion of penalty imposed under Section 271(1)(c) of the Act. 25. Counsel also relied on Commissioner of Income Tax vs. Reliance Petroproducts (P) Ltd. reported in (2010) 322 ITR 0158, where the Supreme Court held that, in order to attract the provisions of Section 271(1)(c), there had to be concealment of income or furnishing of inaccurate particulars of income ....
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....ection shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. (5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which - (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1). (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908) relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section. " 28. An appeal lies under Section 260-A of the IT Act, only when there is a substantial question of law. We find that there is no question of law involved in these appeals much less any substantial question of law. 29. In Sir Chunilal V. ....
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....ere there is room for difference of opinion on it or where the Court thought it necessary to deal with that question at some length and discuss alternative views, then the question would be a substantial question of law. On the other hand if the question was practically covered by the decision of the highest court or if the general principles to be applied in determining the question are well settled and the only question was of applying those principles to the particular fact of the case it would not be a substantial question of law.' This Court laid down the following test as proper test, for determining whether a question of law raised in the case is substantial: (Sir Chunilal case [1962 Supp (3) SCR 549 : AIR 1962 SC 1314] , SCR pp. 557-58) 'The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal Court or is not free from difficul....
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....se involves a substantial question of law, and not a mere question of law. A question of law having a material bearing on the decision of the case (that is, a question, answer to which affects the rights of parties to the suit) will be a substantial question of law, if it is not covered by any specific provisions of law or settled legal principle emerging from binding precedents, and, involves a debatable legal issue. A substantial question of law will also arise in a contrary situation, where the legal position is clear, either on account of express provisions of law or binding precedents, but the court below has decided the matter, either ignoring or acting contrary to such legal principle. In the second type of cases, the substantial question of law arises not because the law is still debatable, but because the decision rendered on a material question, violates the settled position of law . (iii) The general rule is that High Court will not interfere with the concurrent findings of the courts below. But it is not an absolute rule. Some of the well-recognised exceptions are where (i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts....
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....e, he may direct the person to pay penalty as stipulated. 35.Explanation I to Section 271 of the 1961 Act is set out herein below for convenience: "Explanation 1. - 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 or the Commissioner (Appeals) or the Principal Commissioner or Commissioner 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 bona fide 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 thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed." 36. In view of Explanation I, referred to above, the amount added or disallowed in computing the total income of the respondent assessee is, for the purpose of Section 271(1)(c), t....
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....s thereof, unless he proves that the failure to return the correct income did not arise from any fraud or neglect on his part. The assessee is, therefore, by virtue of the notice under Section 271 of the 1961 Act put to notice that if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof and, consequently, be liable to penalty. 41. In K.P.Madhusudhanan (supra), the Supreme Court differed from and disapproved its earlier view in Sir Shadilal Sugar & General Mills Ltd. (supra) that the Revenue was required to prove mens rea for imposition of penalty. The proposition in Sir Shadilal Sugar & General Mills Ltd (supra) that the Revenue is required to prove mens rea for imposition of penalty is no longer good law. 42. The case of K.P.Madhusudhanan (supra), is clearly distinguishable, as it was a case of concealment, where income of Rs. 93,000/- had not been disclosed. Only after explanation was called for, the assessee in that case stated that it had obtained loans, which could not b....
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....eged lease transaction was found to be false and a make believe one. The assessee resisted the claim of the department contending that they were not aware of forged documents and contended that they had not concealed income nor furnished inaccurate particulars. There was no dispute that the documents were forged. 47. In the aforesaid case, the learned Tribunal had upheld the imposition of penalty. The Division Bench found that the conclusion was factual giving rise to no questions of law. Considering the limited scope of Section 260A of the Act, the Division Bench did not find any justification to disturb the order of the learned Tribunal and, accordingly, the appeal was dismissed. 48. In Union of India v. Dharamendra Textile Processors, reported in (2008) 13 SCC 369, the Supreme Court observed as under: "17. It is of significance to note that the conceptual and contextual difference between Section 271(1)(c) and Section 276-C of the IT Act was lost sight of in Dilip N. Shroff v. CIT, (2007) 6 SCC 329. 18. The Explanations appended to Section 271(1)(c) of the IT Act entirely indicates the element of strict liability on the assessee for concealment or for giv....