The Assessee is a proprietor of M/s.Chandrakala & Co., a stockbroker registered with the Madras stock market. During the assessment years 1991-92, 1992-93, and 1993-94, the Assessing Officer rejected the payments made by the assessee to Public Sector Undertakings. On an appeal, the Income Tax Appellate Tribunal vide its order confirmed the accompaniments made by the Assessing Officer. Subsequently, the Assessing Officer initiated penalty proceedings and levied minimum penalties of Rs.8,25,32,755/-, Rs.1,40,55,563/- and Rs.17,68,928/- respectively for the assessment years orders dated 22.07.2005 under Section 271(1)(c) of the Act holding assessees furnished inaccurate particulars of income.
With respect to the orders passed by the Assistant Commissioner of income tax, appeals were filed by the assessee before the Commissioner of tax. The appeals were allowed. Subsequently, the Revenue filed appeals before the Income Tax Appellate Tribunal. Meanwhile, the Deputy Commissioner of income tax, Chennai, also filed a Civil Appeal before the Supreme Court against the order of the Supreme court wherein the Division Bench of this court allowed the appeal filed by the respondent/assessee, by clearing the extra liabilities imposed by the Assessing Officer.
The assessee raised the difficulty whether under the facts and circumstances of the case, the Honorable Income Tax Appellate Tribunal's right in law in upholding the order of the Commissioner of income tax (Appeals) obliterating the levy of penalty under Section 271 (1)(c).
The division bench of Justice M.Duraiswamy and Justice Hemalatha while counting on the choice of the Supreme Court, wherein it had been held that the Respondent had acted only as a broker and will not claim any ownership which the receipt of cash was just for the aim of taking demand drafts for the payment of the differential interest payable by Indian Bank which the Respondent had handed over the said money to the Bank itself, we've no hesitation in holding that the Respondent held the said amount in trust to be paid to the general public sector units on behalf of the Indian Bank-supported prior understanding reached with the bank at the time of sale of securities and, hence, the said sum can't be termed because of the income of the Respondent.