COMMISSIONER OF INCOME TAX Vs. PRASAD GRANITES

JUDGEMENT

(1.) THIS appeal by the revenue arises out of the impugned common order dated 12 -8 -2004 passed in ITA No. 1670/Bang./2002 by the Income Tax Appellate Tribunal, Bangalore Bench B for consideration of the following substantial questions of law: (1) Whether Tribunal was correct in holding that the expression "has concealed the particulars of income" or "furnished inaccurate particulars of such income" as defined under Section 271(1)(c) is not attracted to the facts of the case? (2) Whether Tribunal was correct in holding that the penalty levied under Section 271(1)(c) is outside the purview of the assessing officer even though concealment of income has come to his notice subsequent to a search conducted elsewhere?

(2.) THE facts in brief are that, the Assessee is engaged in the business of exporting Indian granite products. The Assessee filed the original return of income on 31 -8 -1997, declaring loss of Rs. 5,23,483. A revised return was filed on 4 -12 -1997 declaring a loss of Rs. 6,26,850 and claimed return of TDS amount of Rs. 1,20,000. This was processed under Section 143(1)(a) on 5 -2 -1998, determining current year loss at Rs. 2,95,959. The case was selected for scrutiny and after issue of notice, assessment was completed under Section 143(3) on 22 -2 -2000, adopting on a total Nil income. After the completion of assessment, the Assessee filed one more return of income on 31 -8 -2000. Consequent to survey operations of the Assessee pursuant to the search conducted in the case of M/s. Biligiri Granites, Mysore, the Assessee filed a revised return of income. In response to the notice under Section 148, the Assessee vide letter dated 31 -8 -2000, requested to treat the revised return filed in response to notice under Section 148. Thereafterwards, after personal hearing of the Assessee and their representative, an order came to be passed on 24 -1 -2002. Pursuant to the same, penalty proceedings under Section 271(1)(c) of the Act was initiated and an order came to be passed on 31 -7 -2002, levying penalty of Rs. 2,20,000. Being aggrieved by the same, the Assessee filed an appeal before the Commissioner (Appeals) -IV, Bangalore in ITA.48/R -9/Commissioner (Appeals)/IV/2002 -03. The first appellate authority, by its order dated 18 -10 -2002, dismissed the appeal, holding that, the Assessee has furnished inaccurate particulars of income and hence, the assessing officer was justified in imposing penalty of Rs. 2,20,000 under Section 271(1)(c) of the Act and confirmed the order of the assessing officer. Being aggrieved by the said order, the Assessee filed an appeal before the Income Tax Appellate Tribunal, Bangalore Bench B (Tribunal for short) in ITA No. 1670/Bang./2002. The said matter came up for consideration before the Tribunal and the Tribunal allowed the appeal filed by Assessee, holding that the penalty so levied on the Assessee deserves to be deleted. Being aggrieved by the order impugned passed by the Tribunal, the Appellants are in appeal before this Court, raising the aforesaid substantial questions of law.

(3.) LEARNED Counsel appearing for revenue, at the outset, submitted that the Tribunal has committed a grave error and material irregularity in as much as instead of considering the case on merits, it has proceeded to dispose of the matter, following the decision of the Apex Court in the case of Commissioner of Income Tax Vs. Suresh Chandra Mittal, (2001) 251 ITR 9 SC , wherein it was held that the High Court was justified in holding that no penalty could be levied. He submitted that, the Division Bench of this Court in CIT v. Sunrise Industrial Syndicate IT Referred Case No. 246 of 1998, following the decision of the Apex court in the case of M/s. K.P. Madhusudhanan Vs. Commissioner of Income Tax, Cochin, AIR 2001 SC 2704 has held that, the Tribunal was not right in cancelling the penalty under Section 271(1)(c) of the Act. Against the said decision of the Division Bench, the Assessee. Sunrise Industrial Syndicate had filed an appeal before the Apex Court in SLP (Civil) No. 12934/2005, which was dismissed, holding that there is no reason to interfere. Therefore, he submitted that, the impugned common order passed by the Tribunal is liable to be set aside at the threshold itself.