Commissioner of Income Tax vs Sri Krishna Saraf

F.M. Ibrahim Kalifulla, J.—The Revenue filed these appeals against the order of the Tribunal, Chennai Bench ""C"", made in ITA Nos. 2457

and 2172/Mad/2007, dt. 30th June, 2006.

In these two appeals, the substantial questions of law which arise for consideration are :

(i) whether on the facts and circumstances of the case, the Tribunal was right in holding that the penalty u/s 271(1)(c) cannot be levied ?

(ii) whether on the facts and circumstances of the case, the issue of claim of interest u/s 132B(4)(a) can be considered in a rectification petition u/s

154 ?, and

(iii) whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled for interest u/s 132B(4)

(a) when there was no search u/s 132 in the assessee''s premises ?

Having heard Mr. J. Narayanaswamy, learned standing counsel for the appellant Revenue, we are not inclined to interfere with the order of the

Tribunal. To state the facts in brief, a search was conducted on 17th July, 2003 u/s 132 in the premises of one Shri G. Ashok Kumar at No. 13,

Badrachala Mudali Street, Porur, Chennai-600116. The accounts and other incriminating materials were seized from the said premises. Based on

the seizure, a notice was issued to the respondent assessee, pursuant to which, a return of income for the asst. yr. 2004-05 was filed by the

respondent on 28th March, 2005 admitting his total income to the tune of Rs. 1,13,79,337. The return was processed u/s 143(1) which was

subsequently scrutinised by issuing the notice u/s 143(2) and after hearing the respondent assessee, the return of income filed by the respondent

was accepted and the assessment was concluded. Thereafter the tax liability was determined. The AO passed his order of assessment on 27th

March, 2006.

In the order of assessment, there is a specific statement to the effect that during the course of search, safe deposit vault was found in the

premises, which belonged to the respondent assessee, and it contained cash of Rs. 60 lakhs, Indira Vikas Patras worth Rs. 50 lakhs and jewellery

and bullion worth Rs. 17,84,865 (as per valuation report). The order of assessment was appealed against and thereafter, the assessing authority,

by his order dt. 19th Oct., 2006 gave effect to the appellate authority''s order dt. 1st Sept., 2006 and revised the order passed u/s 143(3), by

which the amount refundable to the assessee was also determined. The respondent assessee sought for rectification of the said order dt. 19th Oct.,

2006 by filing an application u/s 154 of the Act, which came to be rejected by the AO on 3rd May, 2007. As against which the assessee

approached the CIT(A), and the first appellate authority, by his order dt. 2nd July, 2007 held that the omission of grant of interest u/s 132B(4)

was a mistake apparent on record, and therefore, the assessing authority should rectify the said mistake and grant interest as per Section 132B(4)

of the Act.

That apart, as against the levy of penalty, the respondent assessee approached the CIT(A) independently, and, by order dt. 8th Aug., 2007, the

first appellate authority took the view that even going by the order of assessment, there being no concealment nor undisclosed income, the levy of

penalty u/s 271(1)(c) was uncalled for and set aside that part of the order. The Tribunal, by the impugned common order dt. 30th June, 2008,

having confirmed the above referred orders of the first appellate authority, the Revenue has come forward with these two appeals.

Mr. J. Narayanaswamy, learned standing counsel for the appellant Revenue, in his submissions, after referring to Section 132B(4), contended

that in as much as no seizure was effected by invoking Section 132 of the Act in the premises of the respondent assessee, the application u/s

132B(4)(a) would not arise. The learned Counsel then contended that in any event, the non-grant of interest in the order dt. 19th Oct., 2006

cannot fall u/s 154 of the Act to enable the respondent assessee to seek for rectification of a mistake apparent on the face of the record. As far as

the deletion of penalty is concerned, the learned Counsel contended that inasmuch as the production of the entries contained in a diary was after

the seizure, there was every justification for the assessing authority to have levied penalty by invoking Section 271(1)(c) of the Act.

Though, in the first blush, the submission of the learned standing counsel appears to be forceful, on a perusal of the orders of the Tribunal, as

well as, that of the first appellate authority, we find that none of the contentions raised by the learned standing counsel merits acceptance. As far as

the contention, viz., the seizure was not effected in the premises of the respondent assessee is concerned, in the first place, the very fact that the

seizure was effected from the safe deposit vault belonging to the respondent assessee as stated in uncontroverted terms in the order of assessment

itself would be the answer to reject the said contention. When once it is admitted that there was seizure of the cash, the Indira Vikas Patras and the

bullion in the course of the search made u/s 132 from the safe deposit vault belonging to the respondent assessee, it is too late in the day for the

appellant to contend that the same were not recovered from the premises of the respondent assessee. In fact, though the search was said to have

been held in the premises of one Thiru. G. Ashok Kumar at No. 13, Badrachala Mudali Street, Porur, Chennai-600 116, the seizure and recovery

were from the safe deposit lockers belonging to the respondent assessee and the very fact that after the seizure, the appellant proceeded to issue

the notice u/s 142(1) to the assessee was sufficient to hold that the seizure made u/s 132 of the Act had every nexus to the assessee and the safe

deposit lockers belonging to him and consequently the resultant proceedings in continuation of such seizure by way of an assessment made u/s

143(3) of the Act, were all to be considered in favour of the assessee. Consequently, it would enable him to seek for the necessary relief u/s

132B(4)(a) of the Act in the event of any default in the application of the said provision. We are, therefore, convinced that the conclusion of the

first appellate authority as well as that of the Tribunal in having held that the respondent assessee was entitled to invoke Section 132B(4)(a) was

perfectly justified.

Insofar as the contention that the respondent assessee was not entitled to invoke Section 154 of the Act is concerned, a plain reading of Section

154 makes it clear that u/s 154(1)(a), if in the event of any mistake apparent from the record in respect of any order passed by the IT authorities

referred to in Section 116 is found, the amending of such an order can be made on its own motion by the authority concerned or at the instance of

the assessee by invoking Section 154(2)(a)/(b) of the Act. Therefore, in the case on hand, when the assessing authority, having passed its order of

refund dt. 19th Oct., 2006 and in as much as we have held that Section 132B(4)(a) gets attracted to the case on hand, when under the said

provision, the assessee is entitled for grant of interest as provided therein and when the same did not find a place in the order of refund dt. 19th

Oct., 2006, it is nothing but a mistake apparent on the face of the record which could have been rectified either on its own motion by the assessing

authority himself u/s 154(2)(a) and in the absence of any such rectification carried out, the assessee was fully entitled to invoke Section 154(2)(b)

and seek for necessary rectification. Therefore, we hold that the order of the first appellate authority and confirmation of the same by the Tribunal

was fully justified.

The assessing authority himself, in his order of assessment dt. 27th March, 2006, has noted that the case was selected for scrutiny by issuing

notice u/s 143(2) and after hearing, the assessee as well as his representative accepted the return of income and completed the assessment. While

holding so, the assessing authority has fully noted the value of the jewellery and bullion found at the time of search, which were valued in the

presence of the assessee by the registered valuer, who valued the same at Rs. 17,84,865, whereas according to the assessee, the value was only

Rs. 17 lakhs. Though the assessee sought to explain the difference in the value, the assessing authority declined to accept the explanation and

treated the difference of Rs. 84,865 as unaccounted investment in the relevant assessment order. The first appellate authority, in the order dt. 8th

Aug., 2007, therefore, rightly held that there was neither concealment nor furnishing of inaccurate particulars. In fact, the first appellate authority

has noted that the assessing authority while issuing the penalty proceedings used the printed form of ITNS-29 and the assessing authority has not

even chosen to strike off either ""concealed the particulars of your income"" or ""furnished inaccurate particulars of such income"". The first appellate

authority has observed that ''even the AO passed the impugned penalty order has not arrived at a clear conclusion whether the assessee had

concealed the particulars of income or furnished inaccurate particulars of income in respect of value of jewellery and maintenance of diary. It is

relevant to note that in the assessment order passed u/s 143(3), no addition was made on account of maintenance of diary. The only addition made

was in respect of value of jewellery.

As far as the levy of penalty is concerned, going by Section 271(1)(c) of the Act, the provisions make it clear that such levy of penalty would

be warranted if at all the assessee had concealed particulars of his income or furnished inaccurate particulars of such income. In such

circumstances, even going by the assessing authority''s order itself, none of the above two ingredients of Section 271(1)(c) gets attracted, and

therefore, the question of levy of penalty did not arise at all. The assessing authority therefore, ought not to have proceeded to levy any such

penalty. The order of the first appellate authority as well as that of the Tribunal in having interfered with the said order of the appellant as regards

the levy of penalty cannot therefore, be found fault with.

For the above stated reasons, the questions of law raised by the appellant are answered against the Revenue. The appeals fail and the same are

dismissed. No costs. Consequently, Misc. Petn. No. 1 of 2009 is closed.