Century Flour Mills Ltd. vs Commissioner of Income Tax

N.V. Balasubramanian J.

This is an application by the assessee u/s 256(2) of the Income Tax Act, 1961, to direct the Appellate Tribunal to state a case and refer the

following questions for the opinion of this court :

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the levy of penalty in respect of the sale

consideration of the sale of land is justified ?

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the sale consideration is not Rs. 8,16,550

as disclosed in the deed of sale but is a sum of Rs. 16,43,539 as estimated by the Assessing Officer ?

Whether the Tribunal is right in law in holding that the extra consideration alleged to have been received by the managing director, should also be

attributed to the applicant company ?

Whether the Tribunal is right in law in holding that the extra consideration alleged to have been received by the managing director of the

applicant company is also applicable for the purpose of levy of penalty u/s 271(1)(c) of the Income Tax Act ?

Whether the Tribunal is right in holding that the applicant company has concealed the particulars of the real consideration in respect of the sale of

the land and consequently, the income is liable for penalty ?

It is a case of levy of penalty and the facts leading to the addition to the capital gains as disclosed by the assessee are fully set out in the

judgment rendered by us in T.C.P. No. 139 of 1996 of even date. Since the facts are fully set out there, it is unnecessary to burden the judgment

with the factual details. However, it is necessary to state that the Income Tax Officer on the basis of the addition made in the assessment order

initiated penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ""the Act""), against the assessee and after

considering the explanation given by the assessee, he held that the real price for which the transaction has been gone through is Rs. 4.2 lakhs per

ground as against Rs. 2.10 lakhs stated in the document of sale. He, therefore, came to the conclusion that the assessee has deliberately concealed

the true particulars of income. In so far as the contention that vicarious liability is not attracted in the hands of the company for the extra income

received, the Income Tax Officer found that the whole transaction was put through the managing director and the company was acting only through

the people working in the company. Therefore, he came to the conclusion that the statements recorded from the eye witnesses clearly show that

the assessee was guilty of concealment of particulars of income. He, therefore, levied minimum penalty u/s 271(1)(c) of the Act of Rs. 6,12,135

after getting approval of the Deputy Commissioner, Central Range-I, Madras.

The assessee preferred an appeal against the order levying the penalty to the Commissioner of Income Tax (Appeals) and the Commissioner

(Appeals) found that the issue relating to the levy of penalty was fully examined and the charge of penalty was proved. As regards the contention

that the assessee had not received the money, the Commissioner (Appeals) found that there is no proof to show that the managing director

pocketed the proceeds of the transaction and the said P. Govindasami acted in the capacity of managing director and the company was liable for

penalty. The Appellate Tribunal, on appeal by the assessee, upheld the addition by stating that the actual sale price was Rs. 4.20 lakhs per ground

and not Rs. 2.10 lakhs as stated by the assessee. The Appellate Tribunal also found that the sale of plot was effected by the managing director and

he was authorised to dispose of the plot of land, and the sale consideration was received by the managing director of the assessee-company and if

any part of the amount was not paid by the managing director of the company, it is for the assessee-company and its managing director to decide.

The Appellate Tribunal, therefore, held that the assessee has to account for the total consideration of the sale of the plot in question. In conformity

with the finding of the Appellate Tribunal in the quantum of appeal, the order of the Commissioner (Appeals), upholding the levy of penalty was

upheld.

The assessee filed a petition u/s 256(1) of the Act before the Appellate Tribunal to state a case and refer the questions set out in paragraph 1

above. The Appellate Tribunal, however, rejected the reference application on the ground that the questions sought for are questions of fact which

led the assessee to file the present application u/s 256(2) of the Act to direct the Appellate Tribunal to state a case and refer the said questions.

Mr. V. Ramachandran, learned senior counsel appearing for the assessee, submitted that the approach of the Appellate Tribunal was erroneous

in sustaining the penalty. According to learned senior counsel, the Appellate Tribunal proceeded on the basis that the penalty is automatic and once

addition was upheld in the quantum appeal, the penalty should follow. According to learned senior counsel, whatever might be the case with

reference to the addition as regards capital gain in so far as the penalty is concerned there must be some independent evidence to show that the

assessee has actually received the money and there was concealment of income in the return filed by the assessee. Hence, according to learned

senior counsel, since the Department has not established the concealment on the part of the assessee, the penalty on the basis of the addition made

in the assessment order which was upheld by the Appellate Tribunal cannot be levied. Therefore, he has submitted that the entire approach made

by the Appellate Tribunal was erroneous and since the Appellate Tribunal has not considered the question in the proper perspective the questions

set out in paragraph 1 above may, therefore, be referred.

Mr. S. V. Subramanian, learned senior counsel appearing for the Department, on the other hand, submitted that the Appellate Tribunal has gone

into the question and found on the basis of the materials that the addition was justified and the Department has established that the assessee has

received much more than what was actually disclosed in the document of sale and hence, the penalty proceedings were validly initiated and penalty

was rightly imposed. According to him, the finding with reference to penalty is a finding of fact and no interference is called for with reference to the

finding of the Appellate Tribunal.

We have considered the rival contentions urged on behalf of the assessee and on behalf of the Department. The Appellate Tribunal found that

on the basis of the seized materials as well as the statement of the purchaser and persons connected with the transaction of sale, the actual sale

consideration was Rs. 16,43,539 and not Rs. 8,16,550 as declared by the assessee. The Appellate Tribunal also found that the receipt of the

additional consideration was proved by the Department and the Appellate Tribunal also found that it was not able to accept the contention of the

assessee that it did not receive any additional consideration. The Appellate Tribunal found that the managing director executed the sale deed on

behalf of the assessee and received the additional consideration on behalf of the assessee and the assessee-company had the knowledge of the

additional consideration. In spite of its specific knowledge, the assessee had not disclosed the true consideration for sale in the return of income

filed by the assessee when declaring the capital gains. The Appellate Tribunal, therefore, upheld the levy of penalty. The findings of the Appellate

Tribunal that there was additional consideration over and above the amount disclosed in the document of sale and the assessee had actually

received the extra consideration are all findings on fact and the findings of the Appellate Tribunal, are based on the materials on record. The logical

conclusion that the Appellate Tribunal has drawn from the factum of proof of receipt of the additional consideration is that the assessee had

concealed the particulars of income in the return of income filed when declaring the capital gains in the said return. Therefore, the said findings of

the Appellate Tribunal are all findings of fact. The Supreme Court in the case of Commissioner of Income Tax (Central), Calcutta Vs. Ashoka

Marketing Ltd., , held that the question whether the assessee had concealed his income is a question to be decided on the facts of the case and

that the finding with reference to the concealment of income is a finding of fact. In the instant case, the Appellate Tribunal has arrived at the finding

of concealment of income on the basis of the materials on record and, therefore, we are of the opinion that no question of law arises out of the

order of the Appellate Tribunal. The view of the Appellate Tribunal that there was concealment of income on the facts of the case, is justified, and,

therefore, we reject the tax case petition. No costs.