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TAXAP/62920/2008 7/ 7 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 629 of 2008
To
TAX
APPEAL No. 635 of 2008
=========================================================
THE
COMMISSIONER OF INCOME TAX-I - Appellant(s)
Versus
JYOTINDRASINHJI
VIKRAMSINHJI JADEJA - Opponent(s)
=========================================================
Appearance
:
MRS MAUNA M BHATT for
Appellant(s) : 1,MR MANISH R BHATT for Appellant(s) : 1,
None for
Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE D.A.MEHTA
and
HONOURABLE
MR.JUSTICE BANKIM.N.MEHTA
Date
: 10/09/2008
COMMON ORAL ORDER
(Per
: HONOURABLE MR.JUSTICE D.A.MEHTA)
1. All
these appeals are taken up for hearing together as they emanate out
of the common order made by the Income-Tax Appellate Tribunal, Rajkot
Bench on 11-5-2007. The appellant revenue has proposed the
following identically worded questions in each appeal:
(A)
Whether the Appellate Tribunal is right in law and on facts in
confirming the order passed by the CIT(A) deleting the penalty levied
u/s 271(1)(c) of the Act?
(B) Whether
the Appellate Tribunal is right in law and on facts in confirming the
order passed by the CIT(A) deleting the penalty levied u/s 273(1)(b)
of the Act?
2. Heard
learned Senior Standing Counsel for the appellant. It was submitted
that in quantum appeal, the respondent assessee having lost right
upto the Tribunal and
earlier against the order of the Settlement Commission upto the
Supreme Court, the Assessing Officer had rightly imposed penalties
under Sections 271(1)(c) and 273(1)(b) of the Income-Tax Act, 1961
(the Act) for each of the years under consideration. It was
submitted that merely by appending a note to the return of income
the assessee cannot escape from his liability to return correct
income and pay correct tax by way of advance tax.
3. As
can be seen from the impugned order of the Tribunal, it has been
found that the assessee had placed in the returns of income the
following note :
1. The
remittance received from the Trusts is not included as according to
the assessee’s opinion the trust being discretionary trust the
receipt trust is not income.
2. The
return is subject to our filing petition before the Settlement
Commission.
4. In
the order, in relation to the penalties levied under Section
271(1)(c) of the Act, the Tribunal has recorded as under:
We
have heard the rival submissions and perused the orders of the lower
authorities and the materials available on record. We find that the
assessee had not disclosed income from the 2 UK trusts on a bona
fide belief that the income was not taxable. He said the boa fide
belief was based upon the decision of the Hon’ble Jurisdictional
Gujarat High Court in the case of CIT Vs. Kamlini Khatu 112 ITR 652.
We
further find that the decision of the Hon’ble Gujarat High Court in
the case of CIT Vs. Kamlini Khatu was over-rued by the Hon’ble
Supreme Court in the case of CIT Vs. Kamalini Khatu 209 ITR 101 by
its order dated 9-5-94. Thus, when the assessee filed the return of
income, the income from 2 UK trusts was not taxable. The Hon’ble
Supreme Court in the case of Brij Mohan Vs. CIT 120 ITR 1 (SC) has
held that penalty under Section 271(1)(c) was leviable according to
the law applicable to the assessee on the date on which the default
was committed by the assessee. We find that on the date on which the
assessee filed the return the decision of the Hon’ble Gujarat
High Court was not over ruled by the Hon’ble Supreme Court. The same
was overruled later on by the decision dated 9-5-1994. Further we
find that after the decision of the Hon’ble Supreme Court the
assessee has further filed appeal in the Gujarat High Court against
the order of the Ahmedabad Bench of the Tribunal on the ground that
the 2 UK trusts being discretionary trusts the income was taxable
in the hands of the beneficiary only when distribution was effected
in favour of the beneficiary by the trust. The appeal of the
assessee has been accepted by the Hon’ble Gujarat High Court and
questions have been framed thereon according to the statement of the
counsel of the assessee made at the Bar. Hence the issue is thus
highly debatable and, therefore, penalty under Section 271(1)(c)
cannot be imposed on the assessee. We find no infirmity in the order
of the CIT(A). It is confirmed. This ground of Revenue is dismissed
for all the years.
5. In
relation to the penalty imposed under Section 273(1)(b) of the Act,
the following findings have been recorded by the Tribunal :
We
have heard the rival submissions and perused the orders of the lower
authorities and the material available on record. The ld. CIT(A) has
decided this issue to quote as under :
4.1 I
have carefully considered the submissions made on behalf of the
appellant. It is seen that the main contention of the appellant is
that the issue of taxability of income from UK trusts was of highly
debatable nature. Moreover, he had sufficient grounds to form an
opinion that the income from UK trusts was not taxable in his hands
because of Gujarat High Court decision in the case of Kamlini Khatu
(in force at that time) and contentions made before settlement
commission in earlier years. The AO has discussed the findings of
settlement commission order but has failed to appreciate that the
said order was passed on 31-3-89. At the time of filing of advance
tax statements the order was not passed. It may also be mentioned
that in respect of the same income penalty u/s 271(1)(c) was also
imposed for all these three years. That issue has been decided by me
by order dtd. 8/01/06 in appeal No.119/02/03 for Asstt. Year 84-85
and followed in other years. The facts relating to the taxability of
income from UK trusts has been discussed in detail and it has been
held that the issue was of debatable nature and the appellant had
sufficient grounds to be of bona fide belief that such income was not
taxable in his hands. In view of that I am of the opinion that the
default of not including this income in the statement of advance tax
cannot be said to be without reasonable cause. Hence income from UK
trusts should not be considered for the purpose of levy of penalty.
On the basis of calculations submitted by the appellant in his
statement of facts minimum penalty for Asstt. Year 84-85 works out
to Rs.601 and nil for other two years. Therefore, the penalty for
84-85 is reduced to Rs.601 and cancelled for the other two years.
A
perusal of the above finding of the CIT(A) shows that after
appreciating the entire facts of the case, he decided the levy of
penalty. The Revenue could not bring any material on record to
controvert the finding of the CIT(A). No error could be pointed out
in the order of the CIT(A). Hence, we confirm the order of the
CIT(A) and dismiss this ground of Revenue for all the years.
6. It
is apparent that both Commissioner (Appeals) and the Tribunal have
concurrently found that when the assessee was required to compute
advance tax and also file returns of income for the years under
consideration the decision of this Court in case of Kamlini Khatau
was in operation and supported the stand of the assessee. That the
decision came to be reversed by the Apex Court subsequently, namely
subsequent to the date of filing of returns of income, or the due
dates for payment of advance tax. In the aforesaid circumstances, it
cannot be stated that the assessee was liable to be visited with any
penalty either under Section 273(1)(b) of the Act or u/s 271(1)(c) of
the Act.
7. The
appeals are accordingly dismissed in absence of any substantial
question of law.
(D.A.
Mehta, J.)
(Bankim
N. Mehta,J.)
/JVSatwara/
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