TaxTMI 
TaxTMI 
2013 (9) TMI 7
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....ase for levy of tax and not good for levy of penalty. 3 That the appellant filed evidence at every stage and never concealed any fact or income. A gift from abroad is not income in any sense and lack of satisfaction on evidence does not warrant penal action. 4 That the order of lower authorities are illegal and arbitrary and deserves to be quashed. " 3 After hearing both the parties we find that during assessment proceedings the AO noticed that the assessee has received two credit entries in the bank account of the assessee amounting to Rs. 1 lakh and Rs. 5,46,575/-. On enquiry it was stated that these two amounts represent the amounts of gifts received from the friends. A sum of Rs. 1 lakh was stated to have been received from Shri Amrit Dilawari and Rs. 5,46,575/- from Shri Charnjit P. Singh. A statement of the assessee was recorded wherein Shri Kamal Kant Jain stated that Shri Amrit Dilawari is a friend but he did not know where he was living presently. In respect of Shri Charanjit P. Singh it was stated that he was residing in America, perhaps in Virginia. W hen the assessee was asked on what occasion the gifts were received it was stated that the gifts were received b....
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....ction 56 was introduced w.e.f. 1.4.2005 therefore, the same could not be treated as concealed income. 6 The ld. CIT(A) did not find force in the submissions and referred to Explanation (1) of Section 271(1)(c). The ld. CIT(A) decided the issue against the assessee vide para 5.1 which is as under: " 5.1 Thus, when the assessee has concealed particulars of his income or furnished inaccurate particulars, conditions laid down in Explanation-1 (supra) have to be examined. In the instant case, the addition on account of gifts was made because the appellant could not prove creditworthiness of the persons and the genuineness of transactions. The addition made was confirmed by Hon'ble ITAT, Chandigarh by holding that the appellant failed to discharge his onus of establishing creditworthiness of the persons and even proving the genuineness of the transactions. As the explanation given by the appellant regarding addition made on account of so called gifts is not satisfactory, the amount is to be treated as income in respect of which particulars have been concealed. The argument of the Ld. Counsel that the addition itself could not have been made since gift is not to be treated as income....
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....er any evidence or grounds of appeal which were filed at every step and again relied upon the order passed by the Assessing Officer who himself has not taken any evidence on record and initiated penalty proceedings just based on a statement of the appellant recorded by him in Ludhiana which was totally misinterpreted by the Assessing Officer as the question was asked in Punjabi & Hindi and written down in English by him. GROUNDS OF APPEAL:- 1. The Learned C.I.T. (Appeals) has not gone into the application of quasi-criminal proceedings to the facts of the case as much as it is very clear law that " penalty proceedings are distinct from the assessment proceedings and are in the nature of quasi-criminal proceedings, " (Kushan Lal Shiv Chand Rai VS C.I.T., Punjab and Haryana High Court. Page No. 21-26 of Paper Book.) Further the Assessing Officer while giving appeal effect did not acknowledge any evidence by way of bank statements, affidavit etc. enclosed at Page No. 1 to 5 of paper book and only repeated the orders of the previous Assessing Officer whereas clearly certain principles are laid down in Law to Judge whether there was concealment or not " Definite finding about co....
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....to bad health and other personal reasons chose to pay tax on the additions to buy peace and settle the litigations but that does not mean that there was concealment. In the case of Handum Industries Limited the Hon'ble Tribunal clearly states that "penalty cannot be imposed on the ground that the assessee accepted the addition in quantum appeal for the reason best known to him." It is prayed that the penalty U/s 271(1)(C) of I.T. Act is uncalled for and totally against the law as there was never any willful concealment done by the appellant and all the evidence was available with the Assessing Officer and the C.I.T. but was totally ignored by them. It is therefore prayed that the penalty imposed by the Assessing Officer and C.I.T. deserved to be deleted and the appellant be given the relief he deserves. Sd/- COUNSEL FOR APPELLANT 10 First submissions made in the written submissions is that the Tribunal has deleted some of the additions but confirmed the addition in respect of gifts amounting to Rs. 646575/- with no mention about the penalty. 11 We find no force in these submissions. The ld. counsel of the assessee has himself contended that penalty proceedings are in....
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....e amount agreed to be added was concealed income is undoubtedly what was laid down by this court in the case of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR 705 and that, therefore, the Revenue was required to prove the mens rea of a quasi- criminal offence. But it was because of the view taken in this and other judgments that the Explanation to section 271 was added. By reason of the addition of that Explanation, the view taken in this case can no longer be said to be applicable." The above clearly shows that after insertion of explanation (1) to Section 271(1)(c) of the Act the penalty cannot be deleted merely because assessee had surrendered the particular item of income for buying peace. In any case in the case before us, no surrender was made and gift was detected by the Assessing Officer during the assessment proceedings. 13 The next decision relied is in case of CIT V. K.R. Chinni Krishna Chetty (Mad) 246 ITR 121 (Citation given in the written submissions was 245 ITR 121) and there was no such judgment. However, to be fair to the assessee after great labour we were able to locate the judgment at 246 ITR 121). In that case the assessee had debited a sum of R....
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.... was of a matter of opinion and does not show that the assessee has concealed the particulars. As observed earlier after insertion of explanation (1) in the Act, it is no more necessary that the assessee should have deliberate intention of concealing because explanation (1) is a legal fiction which states that that assessee would deem to have concealed particulars of his income in the circumstances set out in the explanation. In fact the issue of deliberate concealment as well as mensrea was considered by the Larger Bench of the Hon'ble Supreme Court after a doubt was expressed by a Division Bench of Hon'ble Apex Court regarding correctness of the view expressed in case of Dilip N. Shroff V JCIT and another, 291 ITR 519 (S.C). Hon'ble Constitutional Bench considered and discussed this issue in case of Union of India and others V. Dharmendra Textiles Processors and others, 306 ITR 277 (S.C) and overruled the decision of Dilip N Shroff (supra). It is observed at para 27 as under: "The Explanations appended to section 271(1)(c) of the Income-tax Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing th....
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.... on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out." After above observation the Hon'ble Court discussed various terms for the meaning of business and ultimately held that various interpretations are possible, therefore, non payment of tax was merely a technical breach. It is to be noted that lot of water has flown under the Ganges after this decision because initially Hon'ble Court was of the opinion that unless and until there is a deliberate intention of concealment, penalty cannot be imposed. As far as Income-tax Act is concerned, originally the same position prevailed. Originally in the 1922 Act Section 28 w....
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....ts were of the opinion that even if explanation of the assessee was false the burden still lies with the Revenue to prove beyond doubt that the assessee has concealed particulars of income beyond doubt. The Parliament amended the law by omitting the expression "deliberately" in sub-section (c) which was omitted by Finance Act, 1964. After such omission an explanation was also inserted which reads as under: "Explanation - Where the total income returned by any person is less than eighty per cent of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147(reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or willful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub- section." After insertion of above explanation, the decision....
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....section 271 in the notice u/s 271 is necessary before the provisions of the 14Explanation are applied." The above clearly shows that after insertion of this explanation the burden has been shifted to the assessee to prove that he has not concealed the particulars of income and if such explanation is found to be bonafide then penalty cannot be levied but if no explanation is given or the explanation is found to be false then penal consequences will follow. We may again point out that whatever doubts were there regarding requirement of mensrea or 'deliberateness' have been removed by the Constitution Bench of Hon'ble Supreme Court in case of Union of India and others V Dharmendra Textile Processors &b others (supra). As pointed out above in this case it was clearly held that penalty prescribed u/s 271(1)(c) is no doubt civil liability but sine it is prescribed under the Act the element of strick liability has to be inferred. 16 The next case relied on in the written submissions is that of National Textile V CIT (supra). In this case the addition was made in respect of Rs. 80,000/- of unexplained cash credits and Rs. 90,000/- on account of secured credits. On this additions pena....
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.... of Hon'ble High Court have been made without noticing the decision of Hon'ble Supreme Court in case of K.P. Madhusudanan V CIT (supra). The Hon'ble Supreme Court has clearly held that the explanation of insertion of explanation (1) the burden would shift to the assessee to prove that he has not concealed the income. Therefore, the decision of Hon'ble Supreme Court would prevail against this decision. 17 The next decision relied on is that of CIT V. J.K. Synthetic Ltd. (supra) is also not very relevant because that decision was rendered in response to a review petition. It seems originally the Tribunal deleted the penalty by observing that the assessee had discharged onus to prove that the difference was not owing to a fraud, or willful neglect. Therefore, Hon'ble High Court in the Review petition held that no substance question arises. In fact the decision do not lead to any conclusion in any direction. 18 The next decision relied on is that of Handum Industries Ltd. ITAs No. 1486 & 1487/Hyd/2010. Following written submissions in that case have been relied on by the ld. counsel of the assessee: "In the present case before us, the disallowance made by the Assessing Officer....