2021 (1) TMI 1239 - HC - Income Tax

Court Upholds Denial of Tax Exemption & Penalty Imposed for Non-Disclosure

The court upheld the denial of exemption under Section 54F of the Income Tax Act, emphasizing that additional claims cannot be made during assessment ... Penalty u/s 271(1)(c) - petitioner did not disclose the income out of sale consideration in his return or otherwise before the Department prior to the case being selected for scrutiny - petitioner failed to disclose the income arising out of transfer of long terms capital assets to the tune of ₹ 59,49,000/- in the return filed in the A.Y. 2014-15 despite the sale of his landed property at Bokaro through registered sale on 24.06.2013 i.e., in the F.Y. 2013-14 - HELD THAT:- Petitioner had not disclosed his assets before the income tax department in any of the preceding three assessment years. It was only upon perusal of CIB information extracted from ITD application that it was found that he had sold immovable property of ₹ 59,49000/-but neither the sale consideration nor capital gains was shown by him in the return filed in the A.Y. 2014-15. In those circumstances his case was selected for scrutiny under CASS for assessment. During the course of assessment, petitioner filed a calculation sheet claiming exemption instead of filing a revised return disclosing income arisen from transfer of long terms capital asset due to transfer of his landed property at Bokaro through registered sale deed dated 24.06.2013. It is well settled that such additional claim cannot be made before the assessing officer under the Act to make an amendment in the return without filing a revised return. This Court in the facts and circumstances of the present case, noted above, finds that there is lack of bonafides on the part of the petitioner. On the one hand, he has not disclosed the assets in any of the returns of three previous years to the year i.e. F.Y 2013-14 corresponding to A.Y. 2014-15. On the other hand, after his case being taken up for scrutiny, without filing the revised return, he sought to raise additional claim for exemption under section 54 F of the Act by filing calculation sheet before the Assessing Officer which was rightly denied in the light of the decision Goetze (India) Limited [2006 (3) TMI 75 - SUPREME COURT] - He straightaway approached the Revisional Authority. Before the Revisional Authority, he failed to appear despite repeated notices. Given the limited scope of revisional power, the Commissioner, Income Tax considering the grounds urged by the petitioner and upon analysis of the findings recorded by the Assessing Officer, did not find any illegality, irregularity or incorrectness in the findings on the basis of the materials on record. Being aggrieved by the order of the Revisional Authority, the writ petitioner has approached this Court in writ jurisdiction. Upon consideration of the submissions of the learned counsel for the parties and upon analyzing the relevant materials on record including the findings recorded by the Assessing Officer and the Revisional Authority in the light of the decisions referred to hereinabove and relied upon by the parties, we do not find any error in law or on facts warranting interference in the impugned orders in exercise of writ jurisdiction. Alternative remedy has been raised against the order imposing penalty as is available under Section 246 A(1)(i)(B) - Petitioner however submits that petitioner may be allowed liberty to assail the order of penalty before the Appellate Authority under Section 246(1)(i) (B) of the Act. We may observe herein that this Court has refused to interfere in the order of the Assessing Authority and the Revisional Authority on consideration of the grounds available under the powers of judicial review. We however leave it to the petitioner to approach the Appellate Authority, as per the provisions under the Income Tax Act, 1961 against the order of penalty dated 26.09.2018 (Annexure-9) passed by the respondent no.3- Assessing Officer under Section 271(1) (c) of the Act, if permissible in law. It is made clear that the Appellate Authority may consider the plea of the petitioner uninfluenced by any of the observations of this Court hereinabove. WP dismissed. Issues Involved:1. Denial of exemption under Section 54F of the Income Tax Act.2. Misinterpretation of the Goetze (India) Ltd. v. CIT decision.3. Impact of a bonafide mistake on the petitioner.4. Compliance of Revenue Officers with legal responsibilities.5. Adherence to CBDT Circular no. 014(XL-35) dated 11.04.1955.Detailed Analysis:1. Denial of Exemption under Section 54F:The petitioner claimed exemption under Section 54F of the Income Tax Act during the assessment proceedings, despite not claiming it while filing the original return. The assessing authority rejected this claim, stating that exemptions must be claimed in the return or through a revised return filed within the due date. The Revisional Authority upheld this decision, noting that the petitioner failed to disclose the income from the sale of property in the original return and did not file a revised return. The court agreed with the Revenue's stance, emphasizing that additional claims cannot be made during assessment without a revised return, as per the Goetze (India) Ltd. decision.2. Misinterpretation of Goetze (India) Ltd. v. CIT Decision:The petitioner argued that the decision in Goetze (India) Ltd. was misinterpreted by the authorities. The court clarified that the Goetze (India) Ltd. decision restricts the assessing officer from entertaining claims not made in the return without a revised return. However, higher authorities like the revisional authority can consider such claims. Despite this, the court found that the petitioner did not participate in the revisional proceedings and failed to establish bonafide reasons for not disclosing the income initially.3. Impact of Bonafide Mistake:The petitioner contended that the non-disclosure of income was a bonafide mistake and should not result in penalty. The court noted that the petitioner had not disclosed the sale transaction in the return and had a history of not declaring assets in previous years. This pattern indicated a lack of bonafides. The court upheld the penalty proceedings initiated under Section 271(1)(c) of the Act, stating that the petitioner’s conduct was not bonafide.4. Compliance of Revenue Officers with Legal Responsibilities:The petitioner argued that the assessing officer failed to guide him correctly, as mandated by the CBDT Circular dated 11.04.1955. The court observed that the assessing officer had acted within the legal framework by denying the exemption due to the absence of a revised return. The court found no fault in the actions of the Revenue Officers, as they adhered to the statutory provisions and judicial precedents.5. Adherence to CBDT Circular:The petitioner claimed that the CBDT Circular, which obligates officers to assist taxpayers, was not followed. The court held that the circular does not override the statutory requirement of filing a revised return for claiming exemptions. The court concluded that the circular's provisions were not violated by the Revenue Officers.Conclusion:The court dismissed the writ petition, finding no error in law or facts in the orders of the assessing and revisional authorities. The petitioner was granted liberty to appeal the penalty order before the Appellate Authority under Section 246(1)(i)(B) of the Income Tax Act, with the Appellate Authority to consider the plea uninfluenced by the court's observations.