No penalty can be levied merely on basis of inflated stock statement given to bank for purpose of availing overdraft facilities

Section 271(1)(c), read with section 145, of the Income-tax Act, 1961 - Penalty - For concealment of income [Disallowance of claim] - Assessment year 2000-01 - Assessee availed overdraft facility from bank against hypothecation of stock for purpose of accommodating existing bank finances - Since there was

difference in stock disclosed in stock statements given to bank and stock as per books of account, Assessing Officer imposed penalty under section 271(1)(c) - It was found that assessee was required to show a particular value of stock in order to enjoy continuous overdraft facility - Further, whatever was submitted before bank was disclosed before authority - Whether since there was no concealment of income, penalty was to be deleted - Held, yes [Paras 6 and 7] [In favour of assessee]

HIGH COURT OF GUJARAT

Commissioner of Income-tax -II

v.

Sachidanand Pulse Mills

M.R. Shah AND MS. SONIA GOKANI, JJ.

Tax Appeal No. 655 of 2013

AUGUST  12, 2013 

FACTS

■		The assessee availed overdraft facility for the purpose of accommodating existing bank finances against hypothecation of stock. He provided stock statements to bank in support of it.
■		During assessment proceedings, the Assessing Officer found difference in stock between Stock statements given to bank by the assessee and stock as per the books of account. Accordingly, he imposed penalty under section 271(1)(c).
■		The Commissioner (Appeals) dismissed the assessee's appeal.
■		However, the Tribunal deleted the penalty on ground that no concealment of income was found.
■		On appeal:

HELD

■		It was found that there was as such no concealment by the assessee and considering the case on behalf of the assessee that the stock statement given to the Bank was purely for the purpose of accommodating existing bank finances and the assessee was required to submit stock statement showing a particular value of the stock in order to continuously enjoy overdraft facility and whatever was submitted before the Bank was disclosed before the authority and, therefore, as such there was no concealment. The Tribunal has rightly deleted the penalty imposed under section 271(1)(c). [Para 6]
■		No substantial question of law arises in the present appeal. [Para 7]

CASE REVIEW

CIT v. Mardia Copper Industries [Tax Appeal No. 802 of 2010, dated 19-7-2011].

CASES REFERRED TO

CIT v. Bharat Minerals Sales Corpn. [2012] 253 ITR 419/124 Taxman 201 (Cal.) (para 5), M. Radhakrishniah v. CIT [1984] 147 ITR 133/[1985] 20 Taxman 430 (para 5) and CIT v. Mardia Copper Industries [Tax Appeal No. 802 of 2010, dated 19-7-2011] (para 5).

K.M. Parikh  for the Appellant.

ORDER

M.R. Shah, J. - Present appeal has been preferred by the Revenue challenging the impugned judgment and order passed by the learned Income Tax Appellate Tribunal dated 7.12.2012 passed in I.T.A No.74/Ahd/2010 with respect to the Assessment Year 2000-01 by which the Tribunal has allowed the said appeal preferred by the assessee and has quashed and set aside the order passed by CIT(A) confirming the order passed by Assessing Officer, imposing penalty under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as " the Act").

2. Penalty was imposed by the Income Tax Officer, Ward-4, Anand under section 271(1)(c) of the Act of Rs.23,02,326/- for difference in the stock between the stock statements given to the bank while enjoying the overdraft facility availed from Charotar Nagrik Sahkari Bank Limited, Vasad Branch against hypothecation of stock and stock as per the books of account.

3. Being aggrieved by and dissatisfied with the order passed by the Income Tax Officer imposing penalty under section 271(1)(c) of the Act the assessee preferred appeal before CIT(Appeals) and CIT(Appeals), by order dated 29.10.2009, dismissed the said appeal confirming the order passed by the Income Tax Officer imposing penalty under section 271(1)(c) of the Act.

4. Feeling aggrieved by and dissatisfied with the order passed by CIT(Appeals) in confirming the order passed by the Income Tax Officer imposing penalty under section 271(1)(c) of the Act, on the aforesaid ground, the assessee preferred appeal before the Tribunal and by impugned judgment and order, the Tribunal has allowed the said appeal and has quashed and set aside the order deleting the penalty.

5. Having heard Shri Parikh, learned counsel appearing for the Revenue and considering the impugned judgment and order passed by the learned Tribunal it appears that the Tribunal has directed to delete the penalty relying upon the decision of the Calcutta High Court in the case of CIT v. Bharat Minerals Sales Corpn. [2002] 253 ITR 419/124 Taxman 201 as well as decision of the Madras High Court in the case of M. Radhakrishniah v. CIT [1984] 147 ITR 133/[1985] 20 Taxman 430. Even the issue involved in the present appeal is directly covered by the decision of this Court vide order dated 19.7.2011 in the case of CIT v. Mardia Copper Industries in Tax Appeal No.802 of 2010.

6. Considering the facts and circumstances of the case and when it was found that there was as such no concealment by the assessee and considering the case on behalf of the assessee that the stock statement given to the Bank was purely for the purpose of accommodating existing bank finances and the assessee was required to submit stock statement showing a particular value of the stock in order to continuously enjoy overdraft facility and whatever was submitted before the Bank was disclosed before the authority and therefore as such there was no concealment, learned Tribunal has rightly deleted the penalty imposed under section 271(1)(c) of the Act.

7. We are in complete agreement with the view taken by the Tribunal while deleting the penalty imposed under section 271(1)(c) of the Act. No substantial question of law arise in the present appeal. Hence, present appeal deserves to be dismissed and is accordingly dismissed.

Refer:[2013] 39 taxmann.com 159 (Gujarat)