Fwd: Madras high court on concealment penalty u/s 271(1)(c) only when revenue proves assessee’s conduct falls in category of “dishonest/malafide intention” “gross negligence” and “deliberate attempt to hoodwink” and not where innocence is there & SC latest decision MAK Data explained by proving shifting onus (under explanation 1 to section 271(1)(c));yd bench ITAT on taxability on income from letting of terrace for hoardings assessable in house property head; and Mumbai bench ITAT condition precedent to assess income under AOP/BOI; Hyd bench ITAT on full receipts returned u/s 44AD cannot be taxed as unexplained/deemed income under section 68 when TDS contract certificate there (refer anonymous income concept);Chennai bench ITAT on disallowance u/s 14A and rule 8D for interest portion etc
Kapil Goel
Included in this update:
i) Madras high court on concealment penalty u/s 271(1)(c) only when revenue proves assessee’s conduct falls in category of “dishonest/malafide intention” “gross negligence” and “deliberate attempt to hoodwink” and not where innocence is there & SC latest decision MAK Data explained by proving shifting onus (under explanation 1 to section 271(1)(c));
ii) Hyd bench ITAT on taxability on income from letting of terrace for hoardings assessable in house property head; and Mumbai bench ITAT condition precedent to assess income under AOP/BOI
iii) Hyd bench ITAT on full receipts returned u/s 44AD cannot be taxed as unexplained/deemed income under section 68 when TDS contract certificate there (refer anonymous income concept)
iv) Chennai bench ITAT on disallowance u/s 14A and rule 8D for interest portion etc & TDS credit detailed order
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 12.11.2013
Commissioner of Income Tax,
Chennai -IV ... Appellant
-vs-
M/s.Gem Granites (Karnataka),
The short question which falls for consideration is whether the order of penalty under Section 271(1)(c) of the Act passed by the Assessing Officer and confirmed by the first Appellate Authority, is just and proper.
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 bonafides 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.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 05.11.2013
Tax Case (Appeal) No.403 of 2009
---
Commissioner of Income Tax,
Chennai. ... Appellant
-vs-
M/s.Durr India Private Limited,
admitted on the following substantial question of law:-
Whether on the facts and circumstances of the case, the Tribunal was right in holding that no penalty under Section 271(1)(c) was leviable on the assessee who had claimed a deduction of the liquidated damages provided for in the contract, even though there was no claim against it for the same?
9. Therefore, the assessee to be brought under Section 271(1)(c) of the Act, it has to be found that the assessee's explanation is either false or the assessee is not able to substantiate the explanation offered and fails to prove that such explanation is bonafide, then the amount added or disallowed in computing the total income of such person as a result thereof shall be deemed to represent the income in respect of which particulars have been concealed.
11. In the case of Commissioner of Income Tax vs. Zoom Communication P. Ltd., reported in [2010] 327 ITR 510 (Delhi), the Division Bench of the Delhi High Court after considering the Section 271(1)(c) of the Act and Explanation 1, observed that it is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Explanation 1 to Section 271(1)(c) of the Act would come into play and work to the disadvantage of the assessee. 12. Thus, the sum and substance on the above referred decisions are that penalty being a civil liability, the requirement of mens rea is not an essential element, but the claim of the assessee should be bonafide and mere submission of inaccurate particulars by itself cannot be held against the assessee under the provisions of Section 271(1)(c). In the background of the above case laws, the findings of the Tribunal as regards the bonafide as against the assessee has to be considered. The Tribunal held that the assessee had not concealed any particulars either in its accounts or in other particulars and the contract was made available before the Assessing Officer. The Tribunal noticed that the contract provided a clause by which HMIL could claim liquidated damages from the assessee for delay caused in executing the work and HMIL did not invoke the provision and the assessee was not put to any liability. But, the contract provided for such liability, which is otherwise enforceable in law. The Tribunal observed that the assessee took precaution and provided for the penalty, claimed the same as deduction at the earliest point of time being the assessment year 1998-99. Therefore, the Tribunal held that the precaution taken by the assessee could not be compared with concealment of income and concealment of income means concealment per se for the purpose of avoiding payment of tax, whereas in the case of the assessee, there was no case of concealment at all. In its good faith, the assessee was claiming the deduction at the earlier point of time by furnishing all the details.
13. The battle of brains between the assessee and their consultants on one hand as to its liability under the contract and the Revenue on the other in making the provision, has thus resulted in different interpretation, which is evident in the case on hand on clause 10.1 of the contract. As long as there is nothing on record to show that the assessee concealed the income with a dishonest intention or furnished inaccurate particulars either deliberately or as a result of gross negligence which was not capable of being regarded as an innocent act, penalty is not to be ordinarily levied.
14. In the light of the above findings and taking note of the conditions contained in the contract between the assessee and HMIL we are fully convinced that the assessee's claim for deduction at the earliest point of time for the assessment year 1998-99, cannot be stated to be lacking in bonafides or with the malafide intention with intent to conceal in particulars of income for the purpose of avoiding payment of Tax.
IN THE INCOME TAX APPELLATE TRIBUNAL
‘ C’ BENCH, CHENNAI ITA No. 305/Mds/2013
(Assessment Year: 2009-10) M/s. Allied Investments Housing
P.Ltd., Date of Pronouncement : 7th November, 2013 This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-III, Chennai dated 20.11.2012 for the assessment year 2009-10. The only
grievance of the Revenue in this appeal is that the Commissioner of Income Tax (Appeals) erred in restricting the disallowance under section 14A of the Act to ` 50,000/- as against disallowance of ` 58,64,016/- made by the Assessing Officer.
From the above discussion, the following points emerge:
1. The appellant did .not make any fresh investment during the year which could generate exempt income in forthcoming years.
2. The exempt income of Rs.3,33,320/- earned by the appellant during the year comprised of dividend received from an unlisted company M/s. Vaigai Chemical Industries Ltd, investment in the shares 'of
this company was made in the year 2003- 04.
3. The appellant incurred interest expenditure of ` 1,13,15,453/- during
the year under five major heads, none of which is directly related to earning of
exempt income. 4. The AO has not pointed out any direct nexus between the interest expenditure incurred and the exempt income earned during the year. The appellant's dividend income during the year is Rs. 3,33,320/- and appellant estimated an expenditure of 2% of dividend income as related to exempt income and disallowed an amount of Rs.6,666/- in the
computation of total income. The expenditure estimated by the appellant appears to be highly inadequate. Appellant has to incur various
direct and indirect expenses in as much as the efforts
of the employees go in tracking the mutual fund and other investments, purchase and sale of mutual funds and other assets, deposit of the
dividend warrants, portfolio management etc. Considering the facts and circumstances of the case and judicial precedents discussed in
preceding paras, a sum of Rs. 50,000/- is considered as reasonable expenditure to earn the exempt income. Accordingly, the disallowance is restricted to Rs.50,000/-. This ground is partly allowed.” On a careful reading of the order of the Commissioner of Income Tax (Appeals), we do not find any valid reason to interfere with the findings of the Commissioner of Income Tax
(Appeals). The grounds raised by the Revenue are rejected.
7. In the result, the appeal of the Revenue is dismissed.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH ‘B', HYDERABAD Shri V.Ramchandra Rao,
Hyderabad Date of Pronouncement 22.11.2013 Briefly the facts relating to the issue in dispute are during the
assessment proceedings, the Assessing Officer noted that the assessee
had shown receipts from execution of civil contract works at Rs.32,23,129
and computed net profit thereon at the rate of 8% under S.44AD and
shown income of Rs.2,57,850. The Assessing Officer, observing that the
assessee had not produced any evidence to prove that the above receipts
were from execution of civil contract works, treated the same as income
from other sources and added it to the total income of the assessee,
holding in the process that the provisions of S.44AD is not applicable to
such receipts. Being aggrieved of such addition, the assessee challenged
the same before the CIT(A). We heard the submissions of the parties, perused the orders of
the authorities below as well as other material on record. As can be seen
from the order of the CIT(A), the amount of Rs.32,23,129 represents the
receipts from execution of civil contract works. This factual aspect is
beyond any pale of doubt, since it is substantiated by the documentary
evidence furnished by the assessee. This has also been accepted by the
Department in the assessment under S.143(1) of the Act, made prior to
the date of search. A perusal of the TDS certificate issued by the
contractee, M/s. Soma Enterprises Limited, in favour of M/s. Srinivasa
Constructions which is proprietary concern of the assessee, clearly
establishes the fact that the aforesaid receipt of Rs.32,23,129 is towards
execution of civil contract work entrusted by the contractee M/s. Soma
Enterprises Ltd., to the proprietary concern of the assessee as a subcontractor.
It is also a fact on record that the assessee has not only
disclosed this receipt from civil contract works in the return of income filed for the impugned assessment year in the normal course, prior to the date
of search, but has also estimated income from such receipts by applying
the provisions of S.44AD of the Act and paid taxes on such income. In the
aforesaid circumstances, the Assessing Officer could not have treated the
entire contract receipts as income from other sources, more so in a
proceeding under S.153A of the Act, when the assessee has already
declared such receipts and offered income therefrom in the return filed in
the normal course prior to the search. In the aforesaid view of the matter,
we find no infirmity in the order of the CIT(A). We accordingly uphold the
same, rejecting the appeal of the Revenue for the assessment year 2003-
04.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH “A”, HYDERABAD ITA No. 1423/Hyd/2012
Assessment Year : 2006-07 Smt. Anita Gupta
Hyderabad.
PAN: ACSPG1888 Date of pronouncement : 13-11-2013 This appeal by Assessee is directed against the order of CIT(A)-V, dated 10-07-2012 on the issue of whether the rental income received is to be taxed under the head ‘income from house property
or ‘income from other sources’ Briefly stated, Assessee is 1/5th co-owner of premises bearing no. 5-8-555/, Abid Road, Hyderabad. The premises is used for the
purpose of business of a firm. Assessee along with co-owners has let the terrace and roof of the first floor to M/s Impressions Outdoor Advertising Agency on monthly license to have their hoardings Be that as it may, there is no dispute with reference to the fact what Assessee has received is only lease rent for permitting the hoarding to be erected on the terrace and that too as co-owner and in other co-owners hand no action seems to have been taken. Therefore, considering the fact that, originally, assessment has been completed u/s 143(3), we are not able to agree with the opinion of the AO and CIT(A) that rental income received by Assessee has to be assessed under the head
‘other sources’. The coordinate Bench “B” of ITAT, Mumbai in the case of Mahalaxmi Sheela Premises CHS Ltd.Vs. ITO in ITA Nos. 784 to 786/Mum/2010, dated 30-08-2011 held that income received on lease a portion of terrace of the building for the purpose of fixing of hoarding, neon lights etc. is assessable under the head ‘income from
house property’. Respectfully following the said decision, we hold that rental income received by Assessee on leasing of terrace for hoarding is to be assessed under the head ‘income from house property’. Assessee’s ground on this issue is allowed
M/s. Jawahar N. Ghia &
Others (AOP), Dr. Rane
(Mrs. Hema Sunil), IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH “J”, MUMBAI ITA No. 4665/Mum/2012
Assessment Year: 2004-05 Date of Pronouncement : 19.11.2013 In this appeal, the Revenue has raised various grounds which are related to
decision of the Ld.CIT(A) on the issues of taxability of capital gains in the hands of AOP
vis-a-vis individuals, eligibility of the assessee for deduction u/s 54/54F and the eligibility
of the assessee for 54 EC deductions. Firstly, on the
issue whether the capital gains is to be taxed in the hands of the individuals or AOP, the
perusal of the development agreement entered into with M/s. Streamline Builders
indicates that the said agreement is signed and executed by all the members of the AOP
in their individual capacity and not as members of the AOP and the said agreement does
not have any reference to the AOP. The fact that the payments made in the name of Dr.
Hema Sunil Rane, the then representative of all the members of the AOP clearly
establishes that the AOP has been constituted with the limited purpose of receiving the
income from rent and interest on fixed deposits. It is pertinent mention that the Madras
High Court in the case of CIT Vs Deghamwals Estates has held that the tenants in
common executing a sale deed would not constitute body of individuals. There must be
something more than joining together and executing a document to bring the co-owners
together as a body of individuals. The Punjab Haryana High Court in the case of Sudhir
Nagpal and others Vs ITO [2012] 349 ITR 636 (P&H) has held that to assess individuals to
be forming ‘association of persons’, the individual co-owners should have joined their
resources and thereafter acquired property in the name of association of persons and the
property should have been commonly managed, only then it could be assessed in the
hands of ‘association of persons’. Conversely, the mere accruing of income jointly to more persons than one would not constitute thereon an association of persons in respect of such income. In other words, unless the associates have done some acts or performed some operations together, which have helped to produce the income in question and have resulted in that income, they cannot be termed as association of persons. Unless the members combine or join in a common purpose, it cannot be held that they have formed themselves into an association of person. In the present case also, the co-owners had inherited property from their ancestors and there is nothing to show that they had acted as association of persons while acquiring or transferring the property. The income is, thus, to be assessed in the hands of the individual co-owners. In view of that matter, we do not find any infirmity in the decision of the Ld.CIT(A) holding that the capital gains should be taxed in the hands of the individuals and not in the hands of the AOP. Accordingly,
Grounds no. 1 & 2 are dismissed.
Secondly, on the issue of allowability of exemption u/s 54/54F, the AO has denied
the exemption u/s 54/54F on the ground that assessee has not purchased new residential
property for absorbing this long term capital gains arises out of transfer of property in
question. It is relevant to note that the development agreement itself emphasises on the
area which shall be allotted to the beneficiaries in a newly constructed building as against
their existing areas. The said development agreement clearly indicates the aforesaid
statistics in respect of allotment of areas. This suggests that the allotment in newly
constructed building under the development agreement is an adjustment of debts in
respect of transfer of property within the meaning of development agreement dated 9th
November 2003. Considering this fact in the light of the provisions of section 54, the word
purchased in section 54 must be interpreted in its ordinary meaning as buying for a price
or equivalent of a price by payment in kind or adjustment towards old debts or for other
monetary consideration. The said proposition is supported by the decision of the Hon’ble
Apex court in the case of CIT Vs. V. T.N. Aravinda Reddy [120 ITR 46 (SC)] wherein it has
been held that there is no reason to divorce the ordinary meaning of the word ‘purchase’
as buying for a price or equivalent of price by payment in kind or adjustment towards an
old debt or for other monetary consideration from its legal meaning in section 54(1).
Undoubtedly, each release in the case is a transfer of the releasor's share for
consideration to the release.