TaxTMI 
TaxTMI 
2014 (10) TMI 140
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....confirming the penalty imposed upon them u/s 158BFA(2) of the Income Tax Act, 1961. 2. The facts on all vital points are common in all the appeals. Therefore, for the facilitative reference, we are taking up the facts from the appeal of Shri Mohd. Khasim for which the learned representatives have addressed their arguments. The adumbrated facts are that a search and seizure operation was carried out u/s 132 of the Income Tax Act at all the appellants on 29th May, 2001. Along with the appellants, premises of one M/s Domicile Developers Ltd along with the premises of assessees were also covered. During the course of search, incriminating documentary evidence were found and seized. In order to give a logical end to the proceedings, a notice u/s 158BC dated 8.5.2002 was served upon the assessee on 21.5.2002. The assessees were directed to file return of income within 30 days from the date of notice. Shri Mohd. Khasim had filed his return of income 18/06/2002 declaring nil undisclosed income. Similarly the other appellants have also declared nil income. Notices u/s 143(2) and 142 (1) were issued and served upon the assessee. The case of the Assessing Officer is that Shri Mohd. Kasim a....
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....bting the cost of land and other payment for eviction, brokerage etc. He calculated the capital gain assessable in the hands of each appellants. 3. On the other hand, the stand of the appellants was that at the time of purchase of the land, a partnership firm in the name and style of M/s Tipu Sultan & Co. was constituted on 3.4.1996. The firm has credited the partners a/c with the value of the land brought in as their share. It has been filing regular return of income, but no income has been offered on sale of the property as on date and it was treated as stock-in-trade. The amounts received from M/s Domicile Developers is treated as an advance. The 2nd submissions of the appellants was that as per the agreement dated 8.11.1996, the sale consideration was settled at Rs. 1.27 crores. The assessees had received Rs. 67.00 lakhs through account payee cheques which has been duly showed. Shri Mohd. Khasim has received a sum of Rs. 5.00 lakhs through cheque No.557308 dated 20.10.1996 drawn on Vijaya bank, Austin Town Branch. Similar is the position with regard to other vendors. The existence of other agreements were not specifically denied, but it was contended that they put the signat....
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....ade has been confirmed up to the Hon'ble High Court. During the course of hearing, it was pointed out that SLPs have been filed before the Hon'ble Supreme Court but the learned DR informed in the Court that the SLPs have also been dismissed. Assessing Officer has initiated the penalty proceedings u/s 158 BFA(2) on the ground that the assessees have failed to disclose the true undisclosed income in the shape of capital gain. The Assessing Officer has imposed a penalty of Rs. 18,08,122/- in the case of Shri Mohd. Khasim. The penalties have accordingly been computed in the cases of other assessees. The operative part of the penalty order read as under: "7. It is to be mentioned here that apart from mentioning the above, the assessee in his letter filed 20.11.2009 has not submitted any explanation for the show cause notice, inspite of the fact that the undisclosed income determined by the Assessing Officer has been upheld by both the appellate authorities. It is very much apparent that the assessee has no explanation to offer for the undisclosed income determined by the Assessing Officer against which the penalty proceedings u/s 158BFA(2) were initiated. This is a fit cas....
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....ate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined, (a) where assessments under s. 143 or s. 144 or s. 147 have been concluded (prior to the date of commencement of the search or the date of requisition), on the basis of such assessments; (b) where returns of income have been filed under s. 139 (or in response to a notice issued under sub-s. (1) of s. 142 or s. 148) but assessments have not been made till the date of search or requisition, on the basis of the income disclosed in such returns; (c) where the due date for filing a return of income has expired, but no return of income has been filed,-- (A) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period; or (B) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable t....
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....on. (3) The burden of proving to the satisfaction of the AO that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under sub-s. (2) of s. 32 shall not be set off against the undisclosed income determined in the block assessment under this chapter, but may be carried forward for being set off in the regular assessments." 6. Expounding the scope of the block assessment and inclusion of undisclosed income, the Hon'ble Delhi High Court in the case of CIT vs. Ravi Kant Jain (2001) 167 CTR (Del) 566: (2001) 250 ITR 141 (Del) has observed that the special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. As the statutory provisions go to show, it is not intended to be a substitute for regular assessment. It is in addition to the regular assessment already done or to be done. The assessment for the b....
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....eference to material that has come in the possession of the assessing authority during the course of search proceedings and on which basis the belief about the existence of undisclosed income is entertained by the assessing authority inviting invocation of ss. 158BB and 158BC. The enquiry into the correctness of such returns with reference to material so found has nexus with the object of the special provisions, to adjudicate whether the assessee is still honestly disclosing his income correctly after incriminating material has been found in the possession of the Revenue authority before such returns can be rejected and thereafter to frame assessment estimating the income liable to tax to the best of judgment on the basis of the material that is available with him." 7. The Hon'ble Bombay High Court had also an occasion to examine the concept of block assessment in CIT vs. Vinod Danchand Ghodawat (2000) 163 CTR (Bom) 432 : (2001) 247 ITR 448 (Bom), wherein it was found that an assessee had constructed a bungalow and incurred an expense of Rs. 4,16,000. Thereafter search was carried out and the AO referred ITSSA 7 8 9 10 OS 2012 mohd khasim bangalore the valuation of the bunga....
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....vidence. We find that the scheme of Chapter XIV-B does not give power to the Revenue to draw the presumption in regard to the undisclosed income. The AO could proceed on the basis of material detected at the time of search and the evidence gathered. Under s. 132(4), the authorized officer may, during the course of search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Act." 9. From the above it is clear that undisclosed income in block assessments has to be determined on the basis of the seized material. Thus for assessing an assessee for a block period there should be a search conducted under s. 132. The search only would infuse jurisdiction to an AO over the assessee. The next step for the AO is to serve a notice upon the assessee under s. 158BC inviting it for furnishing the return. When the return is being furnished the AO was required to issue notice under s. 142(2) or under s. 143(2) etc. and compute the undisclosed inco....
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....on of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of Clause (c) of this sub- section, be deemed to represent the income in respect of which particulars have been concealed". 13. A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Assessing Officer or the Learned CIT(Appeals) during the course of any proceedings before them should be satisfied, that the assessee has; (i) concealed his income or furnished inaccurate particulars of income. As far as the quantification of the penalty is concerned, the penalty imposed under this section can range in between 100% to 300% of the tax sought to be evaded by the assessee, as a result of such concealment of income or furnishing inaccurate particulars. The other most important features of this section are deeming provisions regarding concealment of income. The section not only covered the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fi....
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....(a) of s. 158BC, is furnished after the expiry of the period specified in such notice, or is not furnished, the assessee shall be liable to pay simple interest @ one per cent of the tax on undisclosed income determined under cl. (c) of s. 158BC for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time specified in the notice, and-- (a) where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return; or (b) where no return has been furnished, on the date of completion of assessment under cl. (c) of s. 158BC. (2) The AO or the CIT(A) in the course of any proceedings under this chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the AO under cl. (c) of s. 158BC : Provided that no order imposing penalty shall be made in respect of a person if-- (i) such person has furnished a return under cl. (a) of s. 158BC; (ii) the tax payable on the basis of such return has been paid or, if the....
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....lly undisputed position that the penalty proceedings is an independent proceeding, where the evidence can be re-appraised but again that could not authorize the Tribunal to take a contradictory view in the penalty proceedings with regard to inference of facts arrived at in the quantum proceedings and upheld by the Hon'ble High Court. 17. The question before us is, whether at the time of filing the return, a man of ordinary prudence can form a belief that he has no undisclosed income on the basis of seized material supplied to him. Whether such formation of belief is a bonafide one having regard to the material on the record or it is merely a Performa explanation. It is to be kept in mind that if a claim was not made in the return, then the assessee would be foreclosing his right to dispute the claim and would accept the stand of the Revenue. The Hon'ble Supreme Court in the case of Reliance Petro Products Ltd [2010] 322 ITR 158 (SC) has observed that making incorrect claim does not amount to concealment of particulars, because the assessee wants to take a particular stand on the given facts. 18. Let us consider the evidence available on the record. The evidence put in....
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.... agreements of other vendors. 20. The next relevant item is the supplementary agreement dated 22.11.1999 which is being put in service by the Revenue. The consideration clause in this agreement read as under: "WHEREAS the vendors above named had entered into an agreements of sale on different dates individually with the purchases above named in respect of the property bearing Sy. Nos. 181 & 182, situated at Bilekahalli village, Begur Hobli, Bangalore measuring 3 acres, 7 guntas excluding 1 gunta of Karab land, and in part performance of agreements of sale. The Vendors above named have received a total part sale consideration of Rs. 4,13,00,000 from out of total sale consideration of Rs. 4,65,50,000/- balance sale consideration of Rs. 52,50,000/- is to be payable". This agreement contains the rights of third persons also to whom payments were made and they were with held by the vendee. It is relevant to take note of these clauses also: "1. Claim of B.V. Sampath It is agreed by the vendors that the purchasers are entitled to hold a sum of Rs. 17,40,000/- which amount they have already paid to B.V. Sampath apart from a sum of Rs. 6,60,000/- paid to him by these vendors ....
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....state the sale consideration in respect of the lands purchased from Mohd. Kasim and his family members on which Domicile Developers has constructed 308 flats and how much amount has been paid so far to them? Ans. The sale consideration is Rs. 4,65,50,000/-. We have been paid a sum of Rs. 2,75,00,000/-approximately to Mr. Mohd. Kasim and his family members through cash and cheques. A sum of Rs. 1,38,00,000/- has been debited on account of development charges, construction charges, payment of on encroachers and other incidental expenses, which have been incurred by us, which actually should have been incurred by Chotu Sab and his family members. A sum of Rs. 52,50,000/- is still payable to Sri Choto Sab and others, provided the legal disputes are decided in his favour. Q.No.6. Do you have any evidence that a sum of Rs. 2,75,00,000/- as per the above statement has been paid to Mr.Chotu Sab and Others? Ans. I do not have any documentary evidence in the family written agreement in this regard with the above persons. All these payments are properly recorded in the books of accounts of Domicile Developers. These payments are made both by cheques and cash. For some cash payments, ....
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....nts. It is explicitly clear from the reply to the Question No.14. He has disclosed incurrence of Rs. 1.38 crores towards development charges which is part of the total consideration settled at Rs. 4.65 crores in the supplementary agreement. But this figure was nowhere mentioned in the agreement. It was a contradiction emerges out in his statement. For the Developers, it was an expenditure which is of allowable nature. Therefore, the stand of the developer would always be that it has incurred expenditure. As far as disclosure made u/s 132(4) is concerned, it is admissible only against the interest of Shri Naveed and bound Domicile Developers and not the assessee. Against the assessees, it is a corroborative piece of evidence suggesting they have received an amount as per the supplementary agreement. But onus is upon the Revenue to prove that they have actually received. 24. The assessees have been confronted with a list of payments extracted (Supra). On a perusal of their details it revealed that they pertain to 1997 to 1998. At that point of time, the agreements dated 8.11.1996 was only in operation. Supplementary agreement did not see the light of the day, then how the builder ....
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.... Kasim. Yes you told me. Naveed. Do you know that I being a BPA Holder and an agreement holder is not entitled for obtaining the bank loans. Kasim. I do not know and I am not aware of it. Naveed. Was it not your property under the park zone under BDA and which I got it denotified. Was it a fact. Kasim: Yes it is a fact Naveed. Were Mr. Shankar and Mr.Mahadevappa not your agents for getting the land converted to whom money has been paid by me as per your guideline? Kasim. Mr. Shankar and Mr. Mahadevappa are the real estate brokers who were involved in the park zone denotification. I had asked Mr.Naveed to make payments but not under my amount. Naveed. In the supplementary agreement dt. 22.11.1999 were you have acknowledged receipt of Rs. 4.13 crores saying it was for the purpose of bank loan, where is the necessity of mentioning in the same documents the litigations of Mr.B.V.Sampath and Manjog Builders? Kasim. The agreements was prepared by you and we have signed without reading the same". 26. The Assessing Officer on evaluation of these evidences failed to reach on a firm conclusion. He has assessed the income on protective basis. The findings recorded by the Asses....
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.... addition on a retracted declaration solely would not be safe. It is not strict rule of law but it is only a rule of prudence. As a general rule of practice, it is unsafe to rely upon the retracted confession without corroborative evidence. According to the appellants the alleged statement was recorded at 2.00 am in the night at the premises of M/s. Domicile Developers. They were examined in the village. Thereafter they were brought to the premises of Domicile Developers. This situation is to be visualized in the background of intellectual compatibility of these two persons vis-à-vis the authorized officer who recorded the statement and who has cross examined the assessee being a trained Revenue Officer and a businessmen engaged in construction and development of properties. The possibility of layman to come under the influence of more intellectual person under any allurement etc., cannot be ruled out. 28. Thus the question in the light of two sets of evidence was whether it was conclusive to any person to say, what could be the true undisclosed income?, whether the assessees have actually received the amount as ultimately determined in the assessment order, upheld by the....