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TMI Blog2009 (1) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... l subsequent years right from assessment year 1995-96 till assessment year 2005-06, the learned CIT (Appeals) has erred in not deleting in toto the penalty under section 271(1)( c )." Revenue s grounds "1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to recompute penalty levied under section 271(1)( c ) restricting it to the difference on account of addition made to the profit of the assessee company by estimating at 3 per cent of the sales and other income and after allowing deduction of depreciation admissible, without appreciating the facts of the case. 2. The appellant prays that the order of CIT(A) on the above ground to be set aside and that of the ITO/AC/DCIT be restored. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." 2. The assessee challenged the confirmation of penalty under section 271(1)( c ) of the Act, by the ld. CIT(A), on the profit estimated by the Assessing Officer at 3 per cent of sales and other income as against the loss incurred by the assessee. The assessee prayed for deletion of the impugned penalty upheld by the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4.2 In the course of assessment proceedings, the assessee failed to reconcile the various discrepancies, as pointed out by the Assessing Officer. The details of such discrepancies are contained in para 2 of the assessment order dated 28-1-2000. The ld. CIT(A), vide order dated 29-3-2001, dismissed the appeal of the assessee, against this assessment order. The ld. CIT(A) has discussed in great detail about the unreliability of the books of account of the assessee and concluded that the rejection of the books of account and estimation of the profit, as correct. The appeal of the assessee was dismissed by the Hon ble ITAT in ITA No. 4372/Mum./2001 dated 23-8-2004. The Assessing Officer levied penalty, at Rs. 2,02,35,907, under section 271(1)( c ) of the Act, vide order 24-3-2005. The Assessing Officer placed reliance, on the decisions, to support his view, on the levy of penalty, within the meaning of section 271(1)( c ) of the Act CIT v. Gates Foam Rubber Co. [1973] 91 ITR 467 (Ker.), Cement Distributors (P.) Ltd. v. CIT [1966] 60 ITR 586 (Mad.), CIT v. Premier Breweries [2000] 244 ITR 598 1 (Ker.), CIT v. Smt. Vilasben Harmukh Lal Shah [1991] 192 ITR 214 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Chand Shiv Sahai v. CIT [1938] 6 ITR 534 (Lahore); Gates Foam Rubber Co. ( supra ). 6. The ld. CIT(A), in a detailed order gave finding that in regard to all the legal disallowances, made by the Assessing Officer, under various provisions of the Act, as discussed in the impugned appellate order, since the issue of disallowances itself is debatable, no penalty can be held as imposable. In the circumstances the ld. CIT(A), directed the Assessing Officer to recomputed penalty imposable, restricting it to the difference on account of addition made to the profits of the assessee by estimating at 3 per cent of sales and other income and after allowing deductions of depreciation admissible. In regard to the remaining items of disallowance ld. CIT(A), held that no penalty is leviable. 7. In the course of present appellate proceedings the ld. A.R pleaded that there is no profit earned by the assessee and the company is under BIFR. It is a loss case and no specific bogus expenses were brought on record by the Assessing Officer. It was further contended that certain disallowance were made, which do not fall under the purview of section 271(1)( c ) of the Act. The ld. AR r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and determined the income at Rs. 47,68,100, against the loss of Rs. 3,92,23,000. In the said assessment order the Assessing Officer determined income after estimating the net profit of the assessee at the average of 3 per cent, on sales and other income. The Assessing Officer allowed deduction of admissible depreciation from such net profit. The Assessing Officer also made certain legal disallowances under sections 43B, 40A(3), under section 37(2A) of the Act, holding that such expenses are not admissible in terms of provisions of said sections. The assessee preferred further appeal against the said assessment order, which was disposed as dismissed by the CIT(A), vide order dated 29-3-2001. The assessee further filed appeal before the ITAT and the Hon ble ITAT vide order No. ITA No. 4372/Mum./01 dated 23-8-2004 dismissed the appeal in limine. The Assessing Officer levied and quantified the penalty equal to 100 per cent of the notional tax on the difference between the assessed income and the returned loss and the same was quantified at Rs. 2,02,35,907. 9. The ld. AR merely furnished a list of certain case laws along with photocopy of a few case laws, quoted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of this, the case relied upon by the assessee is different in terms of facts and, hence, distinguishable. 9.2 The ld. AR placed reliance on the decision in the case of Sangur Vanaspati Mills Ltd. ( supra ), to support his contention. In the case relied upon by the ld. AR , no such discrepancies were observed in the audited accounts and the estimate of income was based on alleged unaccounted sales. The fact-situation of the case quoted and relied upon by the assessee is patently different and, hence, the ratio of the cannot be applied to the facts of the present case. 9.3 The assessee relied on the decision in the case of Ravail Singh Co. ( supra ), rendered by the Hon ble Punjab Haryana High Court, wherein the assessee has declared a loss for the assessment year 1970-71. It was held by the Hon ble High Court that penalty under section 271(1)( c ) was not leviable after appreciation of the facts of that case. It was a case of normal trading addition made by the Assessing Officer, whereas in the present case the audited accounts of the assessee were replete with fatal and serious unreconciled discrepancies, as discussed above. In view of this, the ratio of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequences, unless it is reasonably shown that the facts of the cases relied upon are similar to the facts on hand, which is essential for the applicability of the ratio of the decisions relied upon. The broad resemblance of the facts to another case is not at all the decisive factor as even a single significant detail may alter the entire aspect. The ld. AR made an attempt to place reliance on the decisions by matching the colour of one case against the colour of another. Such mechanical reliance of judicial precedents by ld. AR hardly serve any purpose to support its case. Needless to say that each case depends on its own facts and a close similarity between one case and another is not enough, because even a single significant details may alter the entire aspects. In deciding such cases, one should avoid the temptation to decide cases, by matching the colour of one case, against the colour of another. To decide, therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. In this context, it is pertinent to quote a decision, in the case of Goodyear India Ltd. v. State of Haryana [1991] 188 ITR 402 (SC), "a precedent is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rring to the principles in the matter of applying precedents held as under : "9. The courts should not placed reliance on decisions without discussing, as to how, the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of the courts are neither to be read as Euclid s theorems nor as provisions of the statute and that to taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of the courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions. But the discussion is meant to explain and not to define. Judges interpret statutes; they do not interpret judgments. They interpret words of statute; their words are not to be interpreted as statutes. In London Graving Dock Co. Ltd. v. Horton [1951] 2 ALL ER 1 (HL), Lord Mac Dermott observed (ALL ER page 14C-D). The matter cannot, of course, be settled merely by treating the ipsissima verba of Willes, J., as though they were part of an Act of Parliament and applying the rules of interpretation appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income- tax Act, 1961, section 271(1)( c )( iii ), Explanation 4 - Circular No. 204 , dated 24-7-1976. Interpretation of Statutes - Prospective or Retrospective. Explanation 4 to section 271(1)( c )( iii ) of the Income-tax Act, 1961, regarding the imposition of penalty even if the returned income is a loss, is clarificatory and not substantive. It applies even to assessment years prior to 1-4-2003, the date on which it was brought into force. What the Finance Act, 2002, intended was to make the position explicit which otherwise was implied. Virtual Soft Systems Ltd. v. CIT [2007] 289 ITR 83 (SC) overruled. A combined reading of the recommendations of the Wanchoo Committee and Circular No. 204 dated 24-7-1976, makes the position clear that Explanation 4 ( a ) to section 271(1)( c )( iii ) intended to levy penalty not only in a case where after addition of concealed income, a loss returned, after assessment becomes positive income, but also in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss or a minus figure. Therefore, even during the period between 1-4-1976 and 11-4-2003, the position was that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case in the matter of prosecution under section 276C." 11. It is essential to analyse the provisions of section 271(1)( c ) of the Act for the purpose of proper appreciation and adjudication. A bare analysis of the provisions of section 271(1)( c ) of the Act makes it evident that where in the case of any proceedings under the Act, the Assessing Officer is satisfied that any person has concealed the particulars of his income, or has furnished inaccurate particulars of such income, penal provisions are attracted. Both the expressions "has concealed" and "has furnished inaccurate particulars" have not been defined in the Act. The net effect of both the expressions is the same, i.e., keeping a portion of the income away from the gaze of the revenue. The former is direct, while the latter may be indirect in its execution. It is trite law that the assessment proceeding and the penalty proceedings are distinct and separate proceedings. Therefore, the findings recorded in the assessment proceedings cannot be conclusive, in the penalty proceedings, though the same may not be irrelevant. It is not legally incumbent on the department, to make any further enquiry where there is any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case where no explanation is furnished or if an explanation is furnished by the assessee, it is found to be false. Finding an explanation to be false is akin to a fact disproved in contrast to a fact "not proved" as defined in the Evidence Act. In such event the conclusion that is to be arrived at is that the amount added or disallowed, in computation is deemed to represent the income, in respect of which the particulars have been concealed. Clause ( b ) comes in picture only when some explanation is furnished, but where the assessee is unable to substantiate the explanation, in respect of the additions or disallowance of any amount, that is to say where the explanation furnished by the assessee is placed in the category of a fact "not proved", which denotes that the fact in enquiry is neither proved nor disproved. This "not proved" state by itself can invite the operation of the Explanation. If in addition to failure to substantiate the explanation, the assessee also fails to prove that the explanation furnished by him was bona fide and that he had disclosed all material facts necessary for assessment, Explanation 1 operates. 11.2 In the light of relevant judicial pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s declared, in the return of income. It cannot be an absolute rule to state that findings in the assessment order are not relevant, particularly for the purpose of levy of penalty under section 271(1)( c ) of the Act. However, it is conclusively established that in the fact-situation of the present case, the findings in the assessment proceedings are definitely relevant being a reflection of continued failure, on the part of the assessee to substantiate the correctness of the loss returned by it. The finding of the ld. CIT(A), on the issue of levy of penalty, in respect of debatable legal disallowances is duly supported by various judicial pronouncements. Therefore, there is no infirmity in the finding of the ld. CIT(A), not to levy penalty in respect of disallowances which are debatable in nature, as discussed in the impugned appellate order and, hence, the same is upheld. 11.5 Having regard to the above legal and factual discussions, impugned appellate order including the assessment and penalty order and considering the relevant judicial precedents, we are of the considered opinion that the findings of the ld. CIT(A), as contained in para 41 of the impugned appellate order di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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