Rev and Ass Fav recent decisions on sec 271(1)(C) compilation : MAK DATA Supreme Court Concealment penalty decision (358 ITR 593) Vs Price Waterhouse decision (348 ITR 306)as interpreted and applied by High Courts and ITAT in context of voluntary vs forced/compelled surrender ; revised return u/s 139(5); incriminating material unearthed during search/survey, explanation and bonafides Vis a Vis concealment penalty u/s 271(1)(c)
Kapil Goel
MAK DATA Supreme Court Concealment penalty decision as interpreted and applied by High Courts and ITAT in context of voluntary vs forced/compelled surrender ; revised return u/s 139(5); incriminating material unearthed during search/survey, explanation and bonafides Vis a Vis concealment penalty u/s 271(1)(c)
Ass fav Orders
IN THE HIGH COURT OF DELHI AT NEW DELHI
ITA 187/2014
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr Sanjeev Sabharwal, Sr. Standing Counsel with Mr Ruchir
Bhalia, Jr. Standing Counsel.
versus
SMT. VINAY SHARMA
6. By an order dated 27.06.2012, the
Assessing Officer imposed a
penalty for a sum of `47,96,000/- under Section 271(1)(c) of the
Act at
the rate of 200% of the tax payable. The assessee challenged the
said
penalty order before the CIT (Appeals) and the CIT (Appeals) by an
order
dated 24.12.2012, upheld the imposition of penalty, however,
reduced the
quantum of penalty from 200% to 150% of the tax payable. The
assessee
challenged the same before ITAT and the ITAT allowed the said
appeal. In
the course of the impugned order, the ITAT relied upon several
rulings of
the several High Courts such as CIT v. Upendra V. Mithani [ITA (L)
No.1860/2009 (Bom.)]; CIT v. M/s Careers Education and Infotech
Pvt. Ltd.
[ITA No. 14/2011 (Pand H)]. Thereafter, the ITAT was of the opinion
that
since the Assessing Officer had nowhere stated that the offer was
made
consequent to the investigation carried out by him. The offer in
fact was
voluntary.
7. The
revenue contends that the decision of the ITAT is contrary to
the law laid down by the Supreme Court in the case of MAK DATA
(Supra).
In that case, during the course of the assessment proceedings, the
Assessing Officer noticed that the documents consisting of share
application forms, bank statements, memorandum of association of
companies, affidavits, copies of income Tax Returns and assessment
orders
and blank share transfer deeds had been impounded in the survey
proceedings initiated under Section 133A of the Act in respect of
the
assessee?s sister concern. On the basis of show cause notice,
information was elicited from the assessee. This resulted in what
was
termed as ?surrender?. The matter went up to the High Court which
rejected the assesse?s argument that the surrender was voluntary
and
penalty not warranted. The Supreme Court confirming the approach
and
decision of the High Court, …..
8.
In the present case, as observed earlier, the Tribunal has relied
upon rulings of several High Courts where the voluntary nature of
surrender of income to buy peace and the circumstances in which the
surrender income could be accepted legitimately, was discussed. In
the present case, the assessee did produce all the relevant
material in the form of books of account, bank statements,
vouchers, sale bills etc. During the course of further enquiry in
the assessment proceedings. The assessee voluntarily offered a sum
of `75 lacs for assessment stating that even though all the
material existed, yet in order to buy peace it was offering the
amount to tax. The facts of this case are clearly such that the
decision in MAK Data (Supra), in the opinion of this Court, cannot
be attracted. The assessee at no point seem to have accepted the revenue?s
contentions that such claimed expenditure was bogus and that it was
not allowable, he offered the amount only to buy peace. There is also no
finding by the AO that the appellant had failed to offer an explanation
in respect of the income returned or had failed to disclose material
particulars.
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI
I .T.A. Nos. 232 to 237/Mum/2012 Assessment Years: 2002-03, 2003-04, 2004-05,
2005-06, 2006-07 & 2007-08 /Date of Pronouncement : 30-07-2014 M/s Ashapura
Minechem Ltd
It is worthwhile to note in this context that in the statements recorded
u/s 132(4) of the Act as a result of search, total additional income of Rs. 20
crores was offered in the case of entire group as a whole. As per the details
subsequently furnished by the assessee, the value of money, jewellery and
other assets as well as income reflected in the entries or transactions found
recorded in the relevant seized documents, however, was less than Rs. 20
crores. In order to fulfill its commitment made in the statements and to avoid
any litigation, the assessee declared the balance additional income on
account of adhoc disallowances of certain expenditure and any other errors or
omission. In the assessments completed u/s 143(3) r.w.s. 153 A of the Act for all the years under consideration, the A.O. accepted this declaration of
additional income made by the assessee. He, however, imposed penalty in
respect of the said additional income by invoking Explanation 5A to section
271(1)(c) of the Act and while challenging the application of the said
Explanation, it was contended on behalf of the assessee before the ld. CIT(A)
that the said additional income did not represent any money, jewellery or
other assets found to be owned by the assessee in the course of the search or
any income based on any entry or transaction found recorded in the seized
documents. When this submission made by the assessee was forwarded by
the ld. CIT(A) to the A.O. seeking his comments, the A.O. did not offer any
comments pointing out that the additional income in question declared by the
assessee was on account of any money, jewellery or assets found to be owned
by the assessee in the course of search or represented any entry or
transaction found recorded in the seized material. The ld. CIT(A) therefore
held that Explanation 5A to section 271(1)(c) of the Act was not applicable in
the case of the assessee after having found that the additional income
declared by the assessee was not on account of any money, jewellery or other
assets found during the course of search or any income based on any entry or
transaction found recorded in the seized documents. He also found that the
additional income was declared by the assessee on account of adhoc
disallowances of certain expenditure and any errors or omission in order to
fulfill the commitment of total additional income of Rs. 20 crores offered in
the statements u/s 132(4) of the Act in group as a whole and to avoid any
litigation. At the time of hearing before us, the ld. D.R. has not been able to
rebut or controvert these findings recorded by the ld. CIT(A) and this being so
and keeping in view all the facts of the case, we fully agree with the
conclusion drawn by the ld. CIT(A) that Explanation 5A to section 271(1)(c) of
the Act is not applicable in the case of the assessee.
At the time of hearing before us, the ld. D.R. has relied on the decision
of Hon’ble Supreme Court in the case of MAK Data (P.) Ltd. (supra) in support
of the Revenue’s case. As rightly submitted by the ld. Counsel for the
assessee, the penalty in the said case, however, was imposed by invoking
Explanation 1 to section 271(1)(c) of the Act whereas the penalties in the
present case were imposed by the A.O. by invoking Explanation 5A to section
271(1)(c) of the Act which is applicable entirely in the different situation.
Moreover, the additional income in the said case was offered by the assessee
on the basis of certain incriminating documents found during the course of
survey carried out u/s 133A of the Act in the case of sister concern and this
additional income was offered only during the course of assessment
proceedings by the assessee despite the fact that the survey was carried out
more than 10 months before the assessee filed its return of income. In these
facts and circumstances, the surrender of additional income by the assessee
was held to be not voluntary by the Hon’ble Apex Court and since the
intention of the assessee was found to be not to declare its true income in the
return filed after the survey, penalty imposed u/s 271(1)(c) read with
Explanation 1 thereto was confirmed by the Hon’ble Supreme Court. The
issue involved in the case of MAK Data (P.) Ltd. (supra) as well as the material
facts involved thus were entirely different from the facts of the present case
and the ratio of the decision rendered by the Hon’ble Supreme Court in that
case, in our opinion, cannot be applied in the present case.
As already noted, the total disclosure of Rs. 20 crores made in the case
of a group as a whole in the statements recorded u/s 132(4) of the Act as a
result of search was not fully represented by any money, valuables and other
assets found during the course of search or any entry or transaction found
recorded in the seized documents. However, in order to keep the commitment
of the total disclosure of Rs. 20 crores made in the entire group as a whole,
the balance amount was offered as additional income on account of adhoc disallowances of certain expenditure and any other errors or omission. The
basis for declaring such additional income thus was duly explained by the
assessee and after having considered all the facts of the case as well as the
material found during the course of survey, the explanation of the assessee
was found to be bonafide and genuine by the ld. CIT(A). Moreover, the
explanation offered by the assessee in regard to the additional income was not
found to be false by the A.O. either during the course of assessment
proceedings or the penalty proceedings and even no adverse comment was
offered by the A.O. by submitting the remand report during the course of
appellate proceedings before the ld. CIT(A) when opportunity was specifically
afforded by the ld. CIT(A) in this regard. At the time of hearing before us, the
ld. D.R. has also not been able to show that the explanation offered by the
assessee in respect of additional income was false. We therefore agree with
the ld. CIT(A) that the penalties imposed by the A.O. in the present case are
not sustainable even as per the main provisions of section 271(1)(c) of the Act.
As such considering all the facts of the case, we find no infirmity in the
impugned orders of the ld. CIT(A) cancelling the penalties imposed by the A.O.
u/s 271(1)(c) of the Act for all the years under consideration and upholding
the same, we dismiss these appeals filed by the Revenue.
IN THE INCOME TAX APPELLATE TRIBUNAL
“B” BENCH, CHENNAI I.T.A. No.138/Mds/2014 Assessment Year : 2009-2010 Shri. V.R. Anbuvelrajan Date of Pronouncement : 25.04.2014.
We have heard both parties and gone through the case file. Per
assessee, the impugned penalty ought to have been deleted in lower
appellate proceedings. The Revenue strongly contests this. It argues
that the land development charges have remained unpaid to the
tune of E2.6 cores even as on 31.03.2013 and quotes case law of
MAK Data (P). Ltd Vs. Commissioner of Income-tax-II [2013] 38
taxmann. com 448(SC). In view of the divergent stands adopted by
the parties, the question before us is as to whether assessee can be
held to have concealed and furnished inaccurate particulars of income
u/s.271(1)(c) of the Act or not. We deem it appropriate to re-narrate
the relevant facts. The assessee had claimed land development
expenses of E3.5 crores by producing bills, payees in person, their
confirmations, proof of TDS deduction and remittance. This factual
position has gone undisturbed. Per Assessing Officer, the payee had
failed to prove any development of the land. After making all efforts
which had proved futile, the assessee chose to restrict his claim of
E3.45 crores to E2.45 crores. The Assessing Officer duly accepted this
and termed disallowance of E1 crore as excessive development charges. Throughout, he did not quote any comparable instance
proving the same to be excessive. He also accepted balance claim of
E2.45 crores. Thus, even as per Assessing Officer this disallowance
of E1 crores was not bogus or a false one but only exhorbitant. And
that too, without any evidence of a comparable instance. To this
effect, there is no finding forthcoming questioning genuiness of
expenses or that the same was never incurred. So, this disallowed
amount of E1 crores is not a false or bogus expenditure to bring it
within the purview of concealment and furnishing of inaccurate
particulars of income. Thus, we hold the impugned penalty under
section 271(1)(c) of the Act could not have been imposed. Whilst
observing so, we reiterate the trite preposition of law that assessment
and penalty proceedings stand an different footings and each and
every disallowance/addition does not lead to automatic imposition of
penalty. Coming to the Revenue’s pleas (supra), we observe that
since a sum of E2.45 crores has already been accepted in ‘scrutiny’
even if it remains unpaid to the tune of E2.26 crores as on 31.03.2013,
does not make any difference as in penalty proceedings, we cannot
upset findings arrived at during the course of assessment. So far as
the case law(supra) is concerned, the assessee therein had failed to
substantiate his claim even at the first instance. Even in penalty proceedings, there was no explanation forthcoming. So, the same
stands distinguished. In this manner, we delete impugned penalty.
IN THE INCOME-TAX APPELLATE TRIBUNAL
‘C’ BENCH, CHENNAI. /I.T.A.No.1099/Mds/2010 Assessment Year:2007-08 Date of Pronouncement : 17.02.2014 M/s. Saudha Associates,
After careful
consideration of the penalty order passed by the Assessing Officer as well
as order of the ld. CIT(Appeals), we find that the assessee has given a
detailed explanation before the Assessing Officer as well as before the ld.
CIT(Appeals). The Assessing Officer has not found any fault with the
explanation given by the assessee. He only disbelieved the explanation by
observing that the explanation would not amount to reasonable cause. The assessee has already submitted that the difference of stock and suppression
of sales were due to technical fault in the computer and discharged the onus
cast upon the assessee. The Assessing Officer has not investigated and no
material was brought on record when the onus was shifted on the
Department. Therefore, under these facts and circumstances, we are of the
opinion that this is not a fit case to impose penalty under section 271(1)(c) of
the Act.
In so far as case law relied on by the assessee, on the decision of
Hon’ble Jurisdictional High Court in the case of CIT v. Gem Granites
(Karnataka) (supra), the Hon’ble High Court has observed as under:
“11. In a recent decision of the Hon'ble Supreme Court in Civil
Appeal No.9772 of 2013, dated 30.10.2013 (Mak Data P. Ltd., vs.
Commissioner of Income Tax-II), the Hon'ble Supreme Court while
considering the Explanation to Section 271(1), held that the question
would be whether the assessee had offered an explanation for
concealment of particulars of income or furnishing inaccurate
particulars of income and the Explanation to Section 271(1) raises a
presumption of concealment, when a difference is noticed by the
Assessing Officer between the reported and assessed income. The
burden is then on the assessee to show otherwise, by cogent and
reliable evidence and when the initial onus placed by the explanation,
has been discharged by the assessee, the onus shifts on the Revenue to
show that the amount in question constituted their income and not
otherwise. Factually, we find that the onus cast upon the assessee has
been discharged by giving a cogent and reliable explanation.
Therefore, if the department did not agree with the explanation, then
the onus was on the department to prove that there was concealment of
particulars of income or furnishing inaccurate particulars of income. In
the instant case, such onus which shifted on the department has not
been discharged. In the circumstances, we do not find that there is any
ground for this Court to substitute our interfere with the finding of the
Tribunal on the aspect of the bonafide of the conduct of the assessee.
12. In the circumstances, following the decision of the Hon’ble
Supreme Court, we uphold the order of the Tribunal and the tax Case
Appeal stands dismissed. No costs.”
11. In the above judgement of the Hon’ble Jurisdictional High Court, it has
been observed that once the assessee has discharged the onus cast upon
the assessee by giving cogent and reliable explanation and the Department
has not found any fault on the explanation given by the assessee, the onus
lies on the Department to prove that there was a concealment. In this case,
no such efforts were made by the Department. Therefore, by following the
decision of the Hon’ble Jurisdictional High Court and keeping in view the
facts and circumstances of the case, we confirm the order passed by the ld.
CIT(Appeals) and penalty imposed by the Assessing Officer is deleted.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH “B” : HYDERABAD ITA.No.1741/Hyd/2013
Assessment Year 2008-09
Smt. B. Rajyasree, Date of Pronouncement : 01-08-2014
The learned DR, on the other hand, strongly supporting the
imposition of penalty submitted that only as a result of search in
course of which such incriminating material were found, the
assessee was forced to declare additional income of Rs.35 lakh.
It was submitted that the assessee has also not offered any
plausible explanation why such additional income was not
offered by her voluntarily in the original return filed. Therefore,
in absence of any satisfactory explanation from the assessee,
imposition of penalty is justified. In support of such contention,
the learned DR relied upon the decision of Hon’ble Supreme
Court in Civil Appeal No. 9772 of 2013 in case of Mak Data P.
Ltd. Vs. CIT.
So
far as the decision of the Hon’ble Supreme Court in case of Mak
Data P. Ltd vs. CIT, on careful examination of the same, we are
of the view that it is not applicable to the facts of assessee’s
case for the following reasons. In case of Mak Data (supra),
incriminating document indicating suppression of income by the
assessee was found during survey operation u/s 133A of the
Act. In spite of such incriminating material found as a result of
survey, the assessee did not come forward and offer additional
income in his return of income. Subsequently in course of
assessment proceedings, when the AO again confronted those
incriminating material to the assessee, being unable to explain
the same, the assessee was forced to offer additional income as
found in the incriminating material. Since there was no voluntary
disclosure by the assessee and there was a difference between
the returned income and the assessed income, the Hon’ble
Supreme Court upheld the imposition of penalty. However, in
the present case, the seized materials have no reference to the
assessee. Further, it is the assessee’s husband Dr. K. Bhaskara
Rao who has owned up the amount mentioned in the seized
materials, but for inexplicable reasons offered it in the hands of
his wife. Moreover, the income declared by the assessee in the
return of income was accepted by the AO in the assessment
order passed. In other words, there is no variation between the
income returned and income assessed. In these circumstances,
the decision in case of Mak Data P. Ltd. Vs. CIT (supra) will not
apply to the facts of the present case. In view of the aforesaid,
we hold that imposition of penalty u/s 271(1)(c) of the Act in the
present case is not justified. Accordingly, we delete the same.
THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA ‘B’ BENCH, KOLKATA I .T.A. Nos.: 835, 836, 837, 838 & 839/Kol ./ 2013
Assessment year : 2006-07, 2007-08, 2009-10, 2010-11 & 2010-11 Shri Aj i t Kumar Surana Date of pronouncing the order : March 18, 2014
Facts
On 28.01.2010, assessee wrote a letter to DDIT (Investigation), owning up the bank accounts in the name of above mentioned persons, as his, along with an affidavit . Assessee also offered to pay tax on the deposits therein, and requested the Department to seize the balance in such bank accounts and adjust the amounts against his tax liability. It was also mentioned therein that he was voluntarily offering Rs. 8 crores as his undisclosed income not forming part of regular returns, out of which Rs.5 crores was stated as for assessment year 2009-10 and balance Rs.3 crores as for assessment year 2010-11.
Thereafter on 23.02.2010, a search under Section 132 was carried out in assessee’s premises. Notices under section 153A of the Act were issued to the assessee for various assessment years starting from assessment years 2004-05 to 2009-10, on 15.09.2010.
At this juncture, it has to be mentioned that ,assessee had prior to the search, f i led regular returns for all the assessment years involved, except for assessment year 2010-11. However, in such returns, no income whatsoever was admitted vis-a-vis the deposits in the bank accounts mentioned at para 2 above. However, in the returns filed in pursuance to the not ice under sect ion 153A, assessee disclosed the deposits in the bank accounts of the five persons mentioned at para 2 above as his income. For assessment year 2010-11, assessee included the figures in his regular return, since the search was during the currency of previous year ending 31.03.2010.
Penalty proposed under sect ion 271(1)(c) for all the years were for concealment of income vis-a-vis deposits in the accounts of five persons, shown by the assessee as his own income in the returns, and further admitted during the course of assessment proceedings, except for assessment year 2009-10. For assessment year 2009-10 penal ty was proposed also on the sum added for alleged sale of shares, share application money, and clubbed minor’s income. Show cause notices were issued to the assessee in this regard.
12. Reply given by the assessee to the show-cause not ices can be summarised as under: -
(i) Disclosure of bank accounts were voluntarily and variation in income was only due to mistake in calculation of the figure. (i i) Disclosure was conditional in that penalty proceeding were not to be initiated.(i i i) Disclosure was bonafide and made to buy peace.
(iv) Apart from the statement given by the assessee, nothing was brought on record to show that the bank accounts belonged to the assessee.
Assessing Officer was least impressed by the above reply. He proceeded to levy penalty under section 271(1)(c) for various assessment years at 100% of the tax sought to be avoided and for assessment year 2010-11 under Sect ion 271AAA at 10% of the undisclosed income. Assessee moved in appeal before the CIT(Appeals) for al l the above years and was unsuccessful in any.
There is no dispute that search in assessee’s premises was done during the period 23.02.2010 to 24/02/2010, well after the declaration filed by the assessee to DDIT(Investigation) on 29.01.2010. Additions made by the Assessing Officer in all the years except for assessment year 2009-10 were entirely for the deposits in the Bank accounts of the six persons. In the returns filed under section 139(1), prior to the search assessee had not included any such amount . However, in the returns filed pursuant to notices under section 153A assessee had included the deposits in the impugned Bank accounts except for the deposits in the name of Smt. Rina Sinha. Though ld. Counsel for the assessee argued that penalty proceedings were not initiated in accordance with law, even if we ignore that argument , it is clear that income offered by the assessee through his declaration dated 28.01.2010, filed on 29.01.2010, prior to the search operation cannot be considered as a sum which was concealed or a sum on which inaccurate particulars were filed, in respect of assessments completed under sect ion 153A and 143(3) of the Act , after the search.
Nature of income whether it was based on a voluntary disclosure by the assessee or investigation done by the Department would be important only in a penalty proceeding initiated in the course of normal assessment proceedings under sect ion 143(3) or 147 of the Act and not for a penalty initiated in the course of an assessment under section 153A of the Act. This has been clearly brought out by the Mumbai Bench of this Tribunal in the case of Shri Kiran Shah (supra). Ld. CIT(Appeals) had upheld the levy of penalty under Explanation 5A to Sect ion 271(1)(c) of the Act. For fastening a penalty under Explanation 5A, the primary requirement is that assessee’s ownership of any money, bull ion, jewellery or other valuation article or thing or income based on any entry in any books of account or other documents, should be found in the course of a search initiated under section 132 of the Act . No doubt assessee might have been constrained to offer as his own, various bank accounts held in different names, due to various developments with regard to the investigation into such Bank accounts. Still it remains a fact that such declaration was given prior to the search. Therefore, deposits in such Bank accounts cannot be considered as something which came out of the search. In our opinion, application of Explanation 5A is ousted at the threshold.
That concealment of income is to be determined with reference to return of income filed in respect to not ice under sect ion 153A of the Act and that there is complete detachment of such proceedings from regular assessment proceedings is clearly coming out of the decision of the Coordinate Bench in the case of Unimark Remedies Limi ted –vs. – ACIT [ITA Nos. 409-411/Mum/2009 & 290-292/Mum/2009- order dated 26.09.2012[ (paper book pages 186 to 208). No doubt , as mentioned by the ld. D.R. , Hon’ble Apex Court in the case of Mak Data Pvt . Ltd. (supra) has clearly held at para 10 of the judgment that Assessing Officer was not required to record his satisfaction in a particular manner or produce it in writing for initiating penalty proceedings. A reading of the judgment of the Hon’ble Apex Court clearly show that though such a requirement of recording of satisfaction is not there, the fundamental aspect of satisfaction being present has not been dispensed with. Assessment order for assessment year 2009-10 in which substantial additions have been done by the Assessing Officer, in our opinion, does not at any place show that Assessing Officer had reached any such satisfaction.
Thus there is an absence of a discernable element of concealment in the additions made. Once a concealment or furnishing of inaccurate particulars is not coming out as such from the returns filed vis-a-vis the finally assessed income, it becomes necessary to see whether any of the deeming provisions set out in the explanations to Section 271(1)(c) will come into play. As already mentioned by us at para 31, Explanation 5A cannot be applied since the threshold condition for applying such explanation has not been satisfied. Leaving the question whether any other explanatory clauses can be invoked in a search case, once explanation 5A is found not applicable open, presuming it can be so done, only other explanation that can be considered in the circumstances of the case is explanation one. At this juncture, it will be worthwhile to have a careful understanding of the judgment of Hon’ble Apex Court in the case of Mac Data Pvt . Ltd. (supra). In this case before Hon’ble Apex Court , there was a survey in the sister concern of the assessee concerned on 16.12.2003, wherein certain documents wi th share application form, bank statements, Memorandum of Association of Companies, Affidavits, copies of income tax returns, assessment also and blank share documents were impounded. Assessee filed its return more than 10 months after the survey, to be precise on 27.10.2004. Despite the survey in the sister concern, it did not include the income that i t should have, in such return. Only when the Assessing Officer issued a show cause notice on 22.11.2006, assessee came out with an offer surrendering income of Rs.40.74 lakh. Assessee offered no explanation for the surrendered income, but only stated that such income was being surrendered to avoid litigation, buy peace and to channelize its energy and resources towards productive work and for amicable settlement with the Department . It was in these circumstances that the Apex Court held that surrender was not voluntary.
As against the above facts, in the case before us there was no survey or search at any place, prior to the disclosure of the bank accounts in the name of five persons as his own by the assessee on 28.01.2010. There was only an enquiry in progress on such accounts by the Department. Well before any notice was issued by the Department , assessee had come up with his disclosure and filed an affidavit before DDI(Investigation). Even Explanation (1) to Sect ion 271(1)(c) could not have been applied on the assessee since assessee had offered explanation and furnished all particulars of the income disclosed by him. As already mentioned by us, particulars of every item of income offered by the
assessee and added by the Assessing Officer is clearly available in the
assessment order for assessment year 2009-10, wherein Assessing Officer has elaborately analyzed the information and particulars given by the assessee, as to how the credits in various bank accounts had come in. None of such explanation given by the assessee were found to be untrue or incorrect .
As for the levy of penalty under section 271AAA for assessment year 2010-11 is concerned, the income finally computed by the Assessing Officer was less than the sum of Rs.3,00,00,000/- declared by the assessee prior to the search in his letter dated 28.01.2010addressed to the DDIT(Investigation). In the notice issued under section 271AAA for levy of penalty, (paper book page no.22) Assessing Officer stated that
assessee had not satisfied the conditions mentioned in sub-sect ion 2 of Section 271AAA of the Act . However, in the penalty order he stated that assessee had concealed his income knowingly and intentionally in the return of income filed before the search. However, for assessment year 2010-11, the return was filed by the assessee on 02.10.2010, which was
after the date of search. Levy of penalty under section 271AAA was for a different reason than the one mentioned in the notice. Ld. CIT(Appeals) on the other hand observed that assessee did not satisfy the condition mentioned in sub-section 2 of Sect ion 271AAA. None of the lower authorities could point out which condition assessee had not satisfied Thus, in our opinion, all the three conditions specified in sub-section 2 of Sect ion 271AAA stood satisfied
Based on our discussion at paras 27 to 38 we are of the opinion that neither of the levy of penalty under section 271(1)(c) for assessment years 2006-07, 2007-08, 2009-10 and 2010-11 nor the levy of penalty under section 271AAA for assessment year 2010-11 could have been fastened on the assessee. Such levies are deleted.
Rev Fav Orders
INCOME TAX APPELLATE TRIBUNAL,MUMBAI - ‘E’ BENCH. Shri Suryaprakash Agarwal Date of Pronouncement : 01-08-2014 ITA No.8727/Mum/2011 Assessment Year-2006-07
Challenging the order dt.13.10.2011 of the CIT(A)-33,Mumbai,Assessing Officer(AO) has raised following Grounds of Appeal:
“1)On the facts and circumstances of the case, and in law, the Ld.CIT(A) erred in law and fact
that Hon’ble ITAT has deleted the quantum addition in A.Y. 2006-07 on the undisclosed income
detected in consequence of search u/s. 133A of the IT Act, on which penalty of Rs.9,65,000/- was
levied u/s 271 (1)(c) of the I.T. Act.
2)On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in relying on the
case law M/s. Bhagat & Co.,Vs.ACIT 101 TTJ (Mumbal) 553, which is not applicable in the
present case as the facts and circumstances are different.
3)The appellant prays that the order of the CIT(A) on the above grounds be reversed and that of
the Assessing Officer be restored.
4)The appellant craves leave to amend or alter any grounds or add a new ground which may be
necessary.
5.We have heard the rival submissions and perused the material before us. Undisputed facts of the case are that the assessee had filed revised return after a survey was conducted at the business premises of the assessee, that he admitted an additional income of Rs.75 lakhs, that the AO held that the assessee had not disclosed the cash receipts of Rs.30,12,752/- in the original return, that he levied penalty of Rs.9.65 lakhs u/s.271(1)(c)of the Act, that the FAA had deleted the penalty. He was of the opinion that declaration made by the assessee was more than the discrepancies found during the survey.
5.1.Before proceeding further, we would like to consider the general principles, propounded by the Hon’ble Courts, with regard to concealment penalty and issue of filing of revised returns and levy of such penalty in light of some of the cases wherein this issue has been deliberated upon. Some of the principles can be summarised as under:
a.In order to justify the levy of concealment penalty two factors must co-exist,firsr there must be some material or circumstances leading to the reasonable conclusion that the amount represents the assessee’s income-it is not enough for the purpose of penalty that the amount has been assessed as income. Secondly, the circumstances must show that there was animus,i.e., conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation to the section has no bearing on factor No.1,but it has a bearing only on factor No.2.
b. Once the AO arrives at a subjective satisfaction under the facts and circumstances of the case, it may not be proper for the Tribunal to enter upon the merits of the controversy at all and unless it is demonstrated; that the indication made by the AO to initiate penalty proceedings was malafide, perverse,based on no evidence, misreading of evidence or which a reasonable man could not form or that the person concerned was not given due opportunity resulting in prejudice; the said proceedings need no interference.
c.The facts that the assessee has disclosed some figures or some particulars by itself would not take the case out from the purview of furnishing inaccurate particulars, even if it takes the case out from the purview of non-disclosure.
d.Though the term inaccurate particulars is not defined, yet the words inaccurate particulars signify an act or omission on the part of the assessee. Such an act can be either for the purpose of concealment of income or furnishing inaccurate particulars.Hon’ble Rajasthan High Court has,in the case of Yashwant Singh (212ITR207),held that the word inaccurate particulars have also to be interpreted to mean the action of an assessee as a result of gross or wilful neglect on his part,
that there may be a case where the additions have been made purely on estimate without going into the details of the expenditure incurred,that in such a case,penalty cannot be levied on the figures which are merely based on guesswork or estimate,that in a case where a detailed enquiry is made and the assessee is confronted with the evidence and has not been in a position to rebut the factual position on the basis of which the additions have been made,the decision stands on a different footing.
e.The applicability of section 271(1)(c) of the Act does not depend on the consent or otherwise of the assessee.(124ITR376).
5.b.As a proposition of law it may be correct that where a revised return as contemplated u/s. 139(5)of the Act is submitted before the assessment is made after an assessee discoveres some omission or some wrong statement in the original return,a penalty proceeding for concealment of the particulars of income or furnishing inaccurate particulars of such income as contemplated u/s. 271(1)(c) of the Act may not be attracted.But,for that purpose,the revised return itself must be within the correct ambit and scope of section 139(5).
5.d.An analysis of above discussion lead us to the following general principles:
i.)Section 139(5)and section 271(1)(c)of the Act meet two different situations.The first proceeds on the basis of the omission or wrong statement which had crept into the original return being inadvertent and unintentional, whereas section 271(1)(c) proceeds on the basis of the concealment being deliberate and the furnishing of inaccurate particulars being wilful and intentional. In other words, where a revised return is filed,the crux of the matter is that if after examining the return and the accounts of the assessee in the course of the assessment proceedings, the AO discovers an omission or wrong statement made by the assessee and, thereafter, a revised return is filed, then the assessee cannot be absolved of the liability for imposition of penalty u/s.271(1)(c), but if the assessee himself voluntarily files a revised return before the order of assessment is made, after he has himself discovered an omission or wrong statement in the original return,then in such a case, penalty for concealment of particulars of income or for furnishing inaccurate particulars of such income, as contemplated u/s.271(1)(c),cannot be imposed.151.333
ii).If the survey proceedings show stocks greater than those disclosed in the books of accounts and the assessee agrees for addition to income on account of excess stock,penalty u/s. 271(1) (c)
of the Act is imposable.(266.AT45Pune-Kunden Silk.)
iii).If the revised returns is not been filed voluntarily in a bona fide manner,but with a view to escape from the consequences of not filing a proper return,and in the reply to the notice u/s.271(1)(c) the assessees does not offer any credible explanation indicating the reasons for which the amount had not been disclosed in the original return,penalty for concealing the income can be justifiably imposed.Hon’ble Gujarat High Court has in the matter of Manibhai and Bros.,discussed the above principle as under:
“Where a revised return is filed,the crux of the matter is that if after examining the return and the
accounts of the assessee in the course of the assessment proceedings,the AO discovers an
omission or wrong statement made by the assessee and, thereafter,a revised return is filed then
the assessee cannot be absolved of the liability for imposition of penalty u/s.271(1)(c) of the
Act.But,if the assessee itself voluntarily files a revised return before the order of assessment is
made, after he has himself discovered an omission or wrong statement in the original return,then in such a case,penalty for concealment of particulars of income or for furnishing inaccurate particulars of such income,as contemplated u/s.271(1)(c),cannot be imposed.” (294ITR105)
v).Levy of penalty for concealment of income is justified in a case where a bogus claim for depreciation on non-existing assets is made and later on claim is withdrawn in the revised after a search is carried out in the case of the assessee.(300 ITR 342).
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI
I.T.A. No.2590/Mum/2013 Assessment Year : 2008-09) Devina Mehra, Date of Pronouncement : 31.7.2014
During the course of scrutiny proceedings, the AO
noticed that the assessee has received interest of Rs.47,21,056/- from the
income tax department on the refund received by the assessee and the same
was not included in the return of income. When questioned about the same, the
assessee admitted that it was an inadvertent error and accordingly agreed for its
addition. Accordingly, the AO added the amount of Rs.47,21,056/- to the total
income of the assessee. The AO initiated penalty proceedings by holding that
the assessee has concealed the particulars of income and also furnished
inaccurate particulars of income. After hearing the assessee, the AO imposed a
penalty of Rs.28,32,365/-, being the amount calculated at 200% of the tax
sought to be evaded. The assessee could not succeed in the appeal filed before the Ld CIT(A). Hence, the assessee has filed this appeal before us
However, in the instant case, the assessee, besides claiming that it was an
inadvertent error, could not bring any other material to show that the said claim
was bona fide one. On the contrary, the break up details given by the assessee,
in our view, militates against his claim for the reason that the interest element
could not have escaped the attention of the person preparing the return of
income on a scrutiny of the Capital Account of the assessee. Hence, in our view, the assessee could not take support of the decision of Hon’ble Apex Court
referred supra.( Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd)
It is also pertinent to refer to the decision rendered by Hon’ble Supreme
Court in the case of Mak Data Ltd (358 ITR 598), wherein the Hon’ble Apex
Court has held that the Explanation offered by the assessee during the course of
penalty proceeding determines the scope of penalty. In the instant case, apart
from stating that it was inadvertent mistake, the assessee could not furnish any
other explanation or material. Further the assessee has also failed to prove that
the explanation offered by him is bona fide one.
10. In view of the foregoing discussions, we are of the view that the Ld
CIT(A) was justified in confirming the penalty levied by the AO.
IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 1st April, 2014 % Date of Decision: 15th April, 2014
ITA 244/2013 COMMISSIONER OF INCOME TAX DELH-II ..... Appellant
versus KALINDI RAIL NIRMAN ENGG. LTD
A Division Bench of this Court was seized with the question in Qammar-ud-din & Sons vs. CIT, (1981) 129 ITR 703, Ranganathan, J. (as he then was) held as follows: -
“The obligation of filing of a return is a solemn and important one and should not be undertaken in a lighthearted and careless manner. It may be that, in some circumstances, an assessee may have to estimate its income, but if so, such estimate should have some basis therefor. An assessee cannot escape its responsibility or escape penal action merely by filing a return showing an estimated income but without there being any real basis for that income.”
11. In that case the penalty was ultimately cancelled by this Court on the ground that there was no fraud or gross or wilful neglect on the part of the assessee and that the Tribunal’s finding to the contrary was vitiated by failure to consider certain material facts
In these circumstances, the mere fact that the estimate was reduced by the Tribunal to 8% would in no way take away the guilt of the assessee or explain its failure to prove that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on its part. It appears to us that the assessee was taking a chance – sitting on the fence - despite the fact that there was a search towards the close of the relevant accounting year in the course of which incriminating documents were found. It appears to us that the intention of the assessee was to take a risk and disclose a lesser income than what it actually earned and rely upon the minor variations in the rate of profits adopted by the taxing authorities and the Tribunal as a defence in the penalty proceedings. The plea – accepted by the Tribunal – that the assessee agreed to be assessed at 11% of the gross receipts only “to buy peace” and “avoid litigation” cannot be accepted by us in view of the judgment of the Supreme Court in MAK Data P. Ltd. (supra). The Tribunal in our view was in error in upholding the order of the CIT (Appeals) cancelling the penalty. We accordingly answer the substantial questions of law framed by us against the assessee and in favour of the revenue
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH “A”, PUNE ITA.No.1133/PN/2012
(Assessment Year 2007-08) Vinay A. Joneja, Date of Pronouncement : 11-04-2014
8.4 Since the gain on sale of the land was short term which has been
wrongly claimed by the assessee as long term by substituting the year of
acquisition as 1999 instead as 2004 and since no revised return was filed
nor the mistake was brought to the notice of the Assessing Officer suo
moto before it was detected by the Department for which the assessee had
to finally surrender the addition, therefore, following the decision of the
Hon’ble Supreme Court in the case of Mak Data Pvt. Ltd., (Supra) and the
decision of Hon’ble Delhi High Court in the case of Zoom Communications
Pvt. Ltd., (Supra) we hold that the Ld.CIT(A) was not justified in deleting
the penalty levied by the Assessing Officer. 8.5 So far as the decision of the Hon’ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. (Supra) is concerned the same in our opinion was under different context and not applicable to the facts of the present case.
However, in the instant case, the asset purchased in the year 2004 has
been taken as 1999 to treat the profit on sale of the asset as long term capital gain and assessee has neither filed any revised return nor brought the mistake to the notice of the Assessing Officer before the same was detected. Therefore, the decision relied on by the Ld. Counsel for the assessee is not applicable to the facts of the present case. In this view of the matter, we set-aside the order of the CIT(A) and confirm the penalty levied by the Assessing Officer.
IN THE INCOME TAX APPELLATE TRIBUNAL
‘ D’ BENCH, CHENNAI
ITA No. 1106/Mds/2011
(Assessment Year: 2001-02)
M/s. E.S.Mydeen & Co
10. As could be seen from the above decision of the
Hon’ble Apex Court that the assessee even though filed
returns voluntarily disclosing additional income pursuant to a
search in the case of sister concerns of the assessee, it is not
a voluntary disclosure made by the assessee, the disclosures
made by the assessee were pursuant to the search
conducted in sister concerns. The Hon’ble Supreme Court
held that the law does not provide that when an assessee
makes voluntary disclosure of his concealed income, he had
to be absolved from penalty. The Apex Court observed that Assessing Officer shall not be carried away by the plea of the
assessee like voluntary disclosure, buy peace, avoid
litigation, amicable settlement etc. to explain away its
conduct. The Apex Court held that it has to be seen whether
the assessee has offered any explanation for concealment of
particulars of income or furnishing inaccurate particulars of
income.
11. In the case on hand, the assessee except stating that it
had filed letter offering additional income, no other
explanation was given even the statement of the assessee
that it had offered additional income voluntarily proved to be
not correct, as the assessee offered this additional income
only after Central Excise authorities conducted search,
impounded books of accounts and found that assessee made
sales outside the books of account. Therefore, the
explanation of the assessee it had voluntarily offered income
is not correct. In the circumstances, we reverse the order of
the Commissioner of Income Tax (Appeals) and restore the penalty order of the Assessing Officer. The grounds raised by
the Revenue are allowed.
12. In the result, the appeal of the Revenue is allowed.