TaxTMI 
TaxTMI 
TaxTMI 
2010 (5) TMI 576
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....me was disclosed Rs. 7,200. The income from other sources was dis- closed at Rs. 1,22,394. The assessee has also shown long-term capital gain on sale of shares of Sri Niwas Leasing and Finance Ltd. The number of shares sold on May 15, 2003 was 23,000 and the sale proceeds were dis- closed at Rs. 25,25,400. Further 27,000 shares were sold on April 21, 2003 and the sale proceeds were disclosed at Rs. 29,64,600. He has also con- structed a house on plot No. 71-72, Chandganj Garden, Lucknow. By an order-sheet entry dated November 30, 2006, the assessee was asked to fur- nish the name of the stock exchange through which the share was purchased and sold along with the rate of shares of the stock exchange on the date of purchase and sale. The assessee has constructed house between the financial years 2001-02 and 2004-05 with investment of Rs. 56,74,567. 4. The order-sheet shows that the counsel for the assessee appeared on October 27, 2006 and required to furnish the contract note of purchase and sale of shares sold with a copy of the bill of the broker, justify holding of shares, which were sold, year-wise investment in the house property, valuation report of the approved valuer,....
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....V, Lucknow. Ref. : Assessment of Rakesh Suri, Khayaliganj, Lucknow for the assessment year 2004-05, PAN: APXPS 3980F. Sir, With reference to your querry regarding long-term capital gain on the sale of shares, it is submitted as under : 1. That the applicant had sold 50000 shares of Shri Niwas Leasing and Finance through the share broker M/s. S. J. Capital Ltd., G-8/94 Sector-15, Rohni, Delhi 110 085 through the Delhi Stock Exchange. 2. That the shares were kept in physical form and not kept in demat account. 3. That the applicant approached the share broker M/s. S. J. Capital Ltd. for reconfirmation of transaction and also for the confirmation of market rate on the date of sale of shares. 4. That the applicant is an assessee to tax from the last over a period of 30 years and understands the consequences in the event of not being able to explain the nature of credit entry in the bank account. Presently the applicant is also not in a position to produce the director of M/s. S. J. Capital Ltd., G-8/94 Sector 15, Rohni, Delhi 110 085. 5. That the share broker M/s. S. J. Capital Ltd. is not co-operating with the app....
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....me-tax Act, 1961 and charged interest under section 234A and 234B of the Act and issued notices for penalty under section 271(1)(c) of the Act vide order dated December 22, 2006. 11. After receipt of the reply of the notice under section 271(1)(c) of the Act, the Assessing Officer imposed penalty of Rs. 18,38,000 on the assessee vide order dated June 18, 2007. 12. Feeling aggrieved, the assessee preferred an appeal against the imposition of penalty. The Commissioner of Income-tax (Appeals), while allowing the appeal, observed that mere issuance of notice or questionnaire does not lead to proof of concealment or furnishing of inaccurate particulars of income. It has further been observed that the order-sheet does not disclose anything about concealment or furnishing of inaccurate particulars. The disclosure of amount lying in the bank on December 6, 2006 was voluntary, hence, no penalty could have been imposed under section 271(1)(c) of the Act. 13. The appeal preferred by the Revenue before the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal") was also dismissed reiterating the order of the appellate authority. The Tribunal observed t....
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....ssessee tried to evade from furnishing the information on November 23, 2006, thereafter on November 30, 2006, only after receipt of final call to make available by December 6, 2006, income was disclosed only on December 6, 2006. 17. Accordingly, in view of the above, the Assessing Officer inferred that being cornered by the Revenue and having no way of escape, the assessee has disclosed the income on December 6, 2006, which cannot be treated as voluntary disclosure. 18. Law helps those who are fair in their action and intend to co-operate with the Department with open heart. In case after trying the best on his or her part to escape the liability, disclosure is made, it may not be treated as voluntary disclosure to escape the penalty under section 271(1)(c) of the Act. 19. While moving application for voluntary disclosure, the assessee must disclose the correct facts, instead of making a ground on false pretext. The narration of facts in the letter of the assessee dated December 6, 2006 (supra) seems to be incorrect or false to some extent in case it is tested in the light of the letter sent by the Delhi Stock Exchange dated December 8, 2006. 20. Reliance h....
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....n, so far as he can do so within the law, and that he may legitimately claim the advantage of any expressed terms or any omissions that he can find in his favour in taxing Acts. In so doing, he neither comes under liability nor incurs blame." 28. Lord Tomlin followed the above in IRC v. Duke of Westminster [1936] AC 1. "Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less then it otherwise would be." 29. However, later on, avoidance of payment of tax was treated as immoral. Lord Simon in Latilla v. IRC [1943] 11 ITR (EC) 78, 79 (HL) ; [1943] AC 377, said : "My Lords, of recent years much ingenuity has been expended in certain quarters in attempting to devise methods of disposition of income by which those who were prepared to adopt them might enjoy the benefits of residents in this country while receiving the equivalent of such income without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which point out that, however, elaborate and artificial such methods may be, those who adopt them are 'entitled' to do so. There is, of course, no doubt that they are ....
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.... in a welfare state like ours. Next there is the serious disturbance caused to the economy of the country by the pil- ing up of mountains of black money, directly causing inflation. Then there is 'the large hidden loss' to the community. . . Then again there is the 'sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it'. Last but not the least is the ethics (to be precise, the lack of it) of transferring the burden of tax liability to the shoulders of the guide- less good citizens from those of the 'artful dodgers'." 34. In the present case, the assessee tried his best to escape from communicating the relevant information even while surrendering the income ground taken for the purpose are not correct. This shows the state of mind and disclosure seems to be not voluntary but under compulsion being cornered by the Revenue. Of course, things would have been different in case immediately after receipt of notice on first and second date, the assessee would have disclosed the escaped income 35. The Bombay High Court in Western Automobiles (India) v. CIT [1978] 112 ITR 1048 (Bom), held that where cash c....
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.... of the Allahabad High Court in the case reported in Bhairav Lal Verma v. Union of India [1998] 230 ITR 855, while interpreting the word "voluntarily" given in section 273A of the Act held that "voluntarily" means out of free will without any compulsion. When the assessee concealed the incriminating material with regard to income so disclosed cannot be held to be voluntarily. It shall be appropriate to reproduce the relevant portion from the judgment of Bhairav Lal [1998] 230 ITR 855 (All) as under (page 862) : "The position thus settled is that the word 'voluntarily' in section 273A of the Act means out of free will without any compulsion. Dis- closure of concealed income after the Department has seized the incriminating material with regard to the income so disclosed, cannot be voluntary disclosure, because it was made under the constraint of exposure to adverse action by the Department. But it cannot be held as a principle of law that the disclosure of income made after the search/raid cannot be voluntary. It is a question which has to be decided by the Department in each case on the basis of the material on the record. If on record there is incriminating material with ....
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....g as the result of the free exercise of the will but not something done under a legal duty.' 'Where a person obtained a passport acted on his own volition and knew the nature of his act and did not act in performance of a legal duty, nor due to coercion or fraud or misrepresentation or mistake he has acted voluntarily.' Abdul Salam v. Union of India, AIR 1969 All 223 at 228. [Citizenship Rules, 1956 R. 30]" 44. Thus, from the dictionary meaning the conduct of the assessee in case judged it does not seem to be a natural disclosure of account while writing letter dated December 6, 2006. The assessee has concealed the material facts and given incorrect statement of fact in para 5 of the application and also not provided information required by the Assessing Officer, at the very threshold after receipt of notice. Accordingly the action of the assessee is neither bona fide nor voluntary. 45. The hon'ble Supreme Court in a case reported in Union of India v. Dharamendra Textile Processors [2007] 295 ITR 244 (SC) ; [2007] 15 SCC 109, held that the basic scheme for imposition of penalty under section 271(1)(c) of the Income-tax Act, section 11AC of the Central Excise Act, 19....