IN THE ITAT JABALPUR BENCH (SMC)

Jainarayan Moolchand Agrawal

v.

Assistant Commissioner of Income-tax (Inv.), Circle 1(1), Jabalpur

Section 253 of the Income-tax Act, 1961 - Appellate Tribunal - Appeals to - Assessment year 1991-92 - Whether if statute gives a right to appeal upon certain conditions, it is upon fulfilment of those conditions that right becomes vested in and exercised by appellant - Held, yes - Whether where assessee was of view that he had paid right Tribunal fee, but in order to purchase peace and to avoid dispute, he paid deficit fee as claimed by Tribunal before effective hearing could take place, it would be just and appropriate to admit appeal - Held, yes

Section 271 (1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1991-92 - Whether penalty can be imposed in case where addition to income is made on an estimate basis - Held, yes - Whether penalty can be imposed on amount, which was surrendered at time of search and disclosed in return filed in response to notice under section 148 - Held, no

Facts

The assessee, in his return of income, showed income of Rs. 54,594. Subsequently, search and seizure operation was conducted at the residential and business premises of the assessee, during which undisclosed assets and incriminating documents were found. On that basis, the department issued notice under section 148, in response to which, the assessee filed return, declaring income of Rs. 83,094. Said return contained income from undisclosed sources amounting to Rs. 28,500, which was surrendered during the search. The Assessing Officer, however, determined income from undisclosed sources at Rs. 3,99,251. On appeal, the addition on account of undisclosed income was sustained to the extent of Rs. 1,02,000. The Assessing Officer imposed penalty on the said sum of Rs. 1,02,000. The Commissioner (Appeals) confirmed the order of the Assessing Officer. On appeal before the Tribunal, the assessee contended that the penalty imposed was liable to be deleted as the impugned addition to his income was made on an estimate basis. Alternatively, he contended that penalty with respect to amount of Rs. 28,500 could not be imposed, the same being the amount surrendered at the time of search and disclosed in the return filed in response to notice under section 148. Since the amount of the Tribunal fee paid by the assessee was less than the prescribed amount, a defect memo was issued to the assessee about short payment. In response thereto, the assessee asserted that his case fell under section 253(6)(d) as the appeal was against the penalty and not against the quantum and so, the fee of Rs. 500 had rightly been paid by him. However, to purchase peace and to avoid dispute, the assessee paid difference of fees of Rs. 4,039 and requested that delay, if any, in payment of fees should be condoned and appeal be admitted and heard on merit.

Held

The right of appeal is neither an absolute right nor an ingredient of natural law of justice, principles of which must be followed in all judicial and quasi-judicial adjudications. The right to appeal is a statutory right and it can be circumscribed by the condition in the grant. If this statute gives a right to appeal upon certain conditions, it is upon fulfilment of these conditions that the right becomes vested in and exercised by the appellant. [Para 6]

In the instant case, deficiency in payment of fee had been made good on 19-4-2006; so the assessee was required to explain the delay beyond 8-6-2005 till 19-4-2006. The assessee was still of the opinion that fee payable was Rs. 500 whereas Special Bench of the Tribunal in the case of Bidyut Kumar Sett v. ITO [2005] 142 Taxman 50 (Cal.), has held that the Tribunal fee against the penalty under section 271(1)(c) was to be in accordance with the income determined as provided under section 253(6)(a, b, c) and not under section 253(6)(d), as contended by the assessee. [Para 7]

Though the assessee had not shown his bona fides and he had just made good the deficiency only to purchase peace and to avoid dispute, yet fact of the matter was that the assessee had paid the full amount of the Tribunal fee and if any lapse was found to be there, that could, at the most, be attributable to the advise received by him and not to him. [Para 8]

As the assessee had paid the balance of the Tribunal fee before effective hearing could take place, it would be just and appropriate to admit the appeal. [Para 10]

The assessee, in response to penalty notice, had categorically stated that the addition had been deleted by the Tribunal and penalty should be dropped, but fact of the matter was that addition to the extent of Rs. 1,02,000 had been sustained by the Tribunal, though on an estimate basis and that addition included the addition of Rs. 28,500 which was the amount surrendered by the assessee at the time of the search and disclosed by him in return filed. So, provisions of Explanation 1 to section 271(1)(c), when explanation furnished by the assessee is found to be false, were attracted. Otherwise, in view of the Supreme Court’s order in the case of B.A. Balasubramaniam & Bros. Co. v. CIT [1999] 157 CTR 556, penalty can even be imposed on an estimated addition also. [Para 15]

Therefore, in view of the facts and circumstance and in the light of above noted authoritative pronouncement, the orders of the authorities below was to be upheld to the extent that penalty was imposable in the instant case. [Para 16]

So far as the amount in relation to which penalty imposable was concerned, in view of the Madras High Court decision, in the case of CIT v. S.D.V. Chandru [2004] 266 ITR 175/136 Taxman 535, penalty with respect to Rs. 28,500, surrendered during the search and disclosed in the return after having made payment of tax and interest on the same, could not be imposed. As such, while upholding the order of authorities below, that penalty was imposable in the instant case, the Assessing Officer was to be directed to restrict the penalty to minimum imposable amount, on the addition of Rs. 73,500 instead of Rs. 1,02,000 and allow necessary relief to the assessee accordingly. [Para 18]

As a result, the appeal of the assessee was partly to be allowed.