TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 6
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....n brief, the grievance of the assessee is that ld. CIT(A) has erred in confirming the levy of penalty imposed under section 271(1)(c) of the I.T. Act, 1961 (herein after the Act). 2. First we take three appeals in the case of KPC Medical College & Hospital. Brief facts of the case are that the assessee is an institute running medical health care educational centre consisting of medical college, nursing college, nursing school and school of nutrition. It is a registered charitable trust under section 12AA of the Act with effect from 1.4.2004. The registration is granted by the ld. D,I,T, (Exemption) vide order dated 25th February, 2005 whose copy has been placed on page 73 of the Paper Book Volume -1. The assessee had filed its return of income on 29.10.2007, 30th September, 2008 and 31st March, 2010 declaring a loss of Rs. 17,74,325, Rs. 12,59,29,557 and Rs. 21,99,09,834 in AYs 2007-08 to AY 2009-10 respectively. A search action under section 132 of the Act was carried out in the case of one Shri Bhaskar Ghosh on 12th July, 2010. During the search at his residence, a cash of Rs. 35,10,400 was found. When Mr. Ghosh was confronted with regard to the recovery of cash, then, in his st....
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....ished the returns. Exemption under section 12AA was claimed and the returns were showing losses. The ld. first appellate authority has noticed the income/losses declared by the assessee in original returns vis-à-vis in the returns filed in response to notice under section 153C of the Act. It reads as under :- AY Original return of income Return filed in response to notice u/s 153C 2007-08 (-) 17,74,325/- (-) 17,74,325/- 2008-09 (-)12,59,29,557/- (-) 15,47,21,356/- 2009-10 (-) 21,99,09,834/- Nil It also emerges out that when the limitation for making the assessments orders under 153C was expiring in the month of March, 2013, the assessee in response to certain queries of the AO came forward with another disclosure offering the donations for taxation. This letter was submitted by assessee on 2nd March 2013 whereby an enhanced amount of donation amounting to Rs. 33.21 crores for all the three years has been offered. The ld. first appellate authority has reproduced this disclosure on pages 21 to 22 of the impugned order. According to the AO, assessee had filed self-styled revised returns on 6th February, 2013 offering the donation for....
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....respect of any facts material to the computation of the total income of any person under this Act, (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the CIT to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income or such person as a result thereof shall, for the purposes of Clause (c) of this subsection, be deemed to represent the income in respect of which particulars have been concealed." 5. 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 betwee....
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.... have been furnished. 6. Shri Poddar has apprised us the meaning of expression ''concealment'' employed in section 271(1)(c). He made reference to a large number of cases, more particularly the decision of Hon'ble Supreme Court in the case of Dilip N. Shroff vs. JCIT, 291 ITR 519, Ashok Pai vs. CIT 292 ITR page 11. The observation of Hon'ble Supreme Court in the case of Ashok Pai read as under :- '16. In Dilip N. Shroff vs. JCIT (civil appeal arising out of SLP (c) No.26831/2004 delivered today', this court observed :- ''The expression ''conceal is of great importance. According to Law Lexicon, the word 'conceal' means : ''to hide or keep secrete. The word ''conceal'' is con+celare which implies to bide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the Income-tax authorities.'' In Webster's Dictionary, ''inaccurate'' has been defined as : ''not accurate, not exact or correct; not according to truth; erro neous; as an inaccurate statement, copy or transcript.''....
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....ng the assessment order null and void, because of assessee's non-challenging of that notice in assessment proceedings. But for the purpose of absolving the assessing from visiting the penalty, it is to be tested that penalty proceedings is being initiated from a invalid assessment proceedings. The jurisdiction in the AO would flow from service of a valid notice under section 153C. The jurisdiction in the AO cannot be infused by consent i.e., that assessee has not challenged the service of notice under section 153C in the regular assessment proceedings, therefore, assessee has given a deemed consent for taking up proceedings against him under section 153C and, therefore, assessee is precluded from raising any such plea. For buttressing his contentions on his multiple submissions, he filed six compilations of case laws, whereby he placed on record 106 decisions of the Hon'ble Supreme Court, Hon'ble High Courts and I.T.A.T. However, these are settled principles of law. We do not have any hesitation in accepting the contentions of Shri Poddar on this issue. We do not feel necessity of fortifying ourselves by reciting and recapitulating all the decisions including that of Hon'ble Gujara....
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....udgement of Hon'ble Supreme Court in the case of Manish Maheshwari vs. ACIT 289 ITR 341, in the case of Pepsi Foods Pvt. Ltd. vs. ACIT 367 ITR 112. He also relied upon the judgment in the case of CIT vs. Calcutta Knitwears 362 ITR 673. 8. Shri Poddar, after appraising us to the mandatory conditions for initiating a valid proceedings under section 153C of the Act, contended that required facts are not available on the record which may justify the action against the assessee under section 153C of the Act. In his stride to persuade us that satisfaction note is not based on any cogent material, he drew our attention towards page 74 of the Paper Book volume-1, wherein alleged satisfaction note is available. Impugning this note he contended that the AO has made a reference to the statement of Shri Bhaskar Ghosh and Shri Uttam Chakraborty. In this so-called satisfaction note, on the basis of statement of Shri Bhaskar Ghosh, an inference was drawn that a sum of Rs. 35,10,400 found at his residential premises were belonging to the assessee. However, the disclosure made on the date of search has been retracted by this person. He has surrendered this amount and assessment order has been pas....
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.... premises of the assessee. 12. At this stage, it is pertinent to take note of the satisfaction note recorded by the AO which reads as under :- ''KPC Medical College & Hospital, 1F, Raja F. C . Mullick Road, Jadavpur. 10/10/2011 A search & seizure operation u/s 132 of the I.T. Act, 1961 was conducted on Shri Bhaskar Ghosh on 12/07/2010. Cash Rs. 35,10,400/- was found in his residence situated at P-169, Regent Estate, 2nd Floor, Kolkata-92. In the statement under oath, Shri Bhaskar Ghosh stated that the money belonged to the KPC Group of Companies. M/s KPC Medical College & Hospital is the main organization of the group. A survey u/s 133A of the I.T. Act, 1961 was also conducted in the premises of M/s KPC Medical College & Hospital on the same day i.e. 12/07/2010. In the statement given on that day, Shri Uttam Chakraborty, (Director, Finance) of KPC Medical College & Hospital has stated that the cash amount found (and subsequently seized) with Mr. Bhaskar Ghosh was withdrawn from the account of M/s KPC Medical College & Hospital, S.B.I., Jadavpur Branch. So, in view of above, it is seen that the money seized during the search conducted in the premises of Shri Bhaskar Ghosh ....
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....; Dhrubajyoti Ray Dy. CIT, CC -XXIV, Kolkata &n....
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....f account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly.'' A bare perusal of these two sections would reveal that where the AO of the searched person is satisfied that any money, bullion, jewellery, books of account or other documents, etc., belong to a person other than the person searched, then, such documents or assets shall be handed over to the AO of other person and the latter AO shall proceed against such other person to assess or reassess his income. However, before handing over these documents and assets, the AO of the searched person would record his satisfaction that the assets and documents belong to some other person than the searched person. The AO of such other person would acquire jurisdiction to make assessment or reassessment of the other person only when satisfaction was recorded by the AO of the searched person exhibiting that documents and assets belonging to other persons so found and it is transmitted to the AO of the oth....
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....AO was examining the file of Shri Bhaskar Ghosh. On perusal of his statement recorded under section 132(4) coupled with the fact of cash found during the course of search and buttressed by the Managing Director (Finance) of the KPC Group of companies, visualized that cash belonged to the assessee, he immediately took a piece of paper and recorded his satisfaction that the money belongs to the assessee, therefore notice under section 153C is to be issued in the case of assessee. The question is, where this paper was placed by him? Whether in the order sheet entries of Shri Bhaskar Ghosh's assessment proceedings; in a separate file or in cupboard available in his room. There is no dispute raised by the ld. representatives that this satisfaction was not recorded within the stages contemplated by the Hon'ble Supreme Court in the case of CIT vs. Calcutta Knitwears (extracted supra). The attempt at the end of ld. counsel for the assessee is that there should be a straight jacket system, whereby the satisfaction recorded even by the same AO then, that should be placed in the file of searched person and if it is placed in some other cupboard in his room by the AO then, there cannot be any ....
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....skar Ghosh has ultimately retracted this statement and surrendered this amount for taxation in his hands. Therefore, this evidence is to be excluded from consideration. With regard to Shri Uttam Chakraborty, -he drew our attention towards page 171 of the Paper Book, where copy of his statement has been placed on record. It was emphasized that he has nowhere deposed that this amount was withdrawn from the account of KPC Mecial College and Hospital. We do not find any merit in this contention of the ld. counsel for the assessee. Because when AO was recording his satisfaction, he was not supposed to draw firm conclusion. He has to make a prima facie opinion. There should be a nexus between the material available with him vis-à-vis the formation of his opinion which satisfy that the money belongs to a person other than the searched person. As far as the statement of Shri Uttaam Chakraborty referred by the ld. counsel for the assessee is concerned, this statement has not been referred to by the AO in the satisfaction note. The statement is dated 8th September, 2010. It was recorded under section 131 of the Act whereas the statement referred to by the AO in the satisfaction note i....
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....d return and offered the sum of Rs. 33.21 crores for taxation, did not challenge issuance of notice u/s 153C. Therefore, in our opinion the AO has the material collected during the course of search exhibiting that money belonging to the assessee was found at the premises of the searched person. Therefore, the material exhibiting the recovery of money along with fact that information about the money and the money was handed over to the AO who has jurisdiction over the assessee. A satisfaction was recorded for initiating proceedings under section 153C of the Act. It was recorded as per procedure provided in the section and a notice u/s 153C was rightly issued upon the assessee. The assessee failed to bring on record any flaw. 20. As far as the judgments relied upon by the ld. counsel for the assessee are concerned, we have considered them and they are distinguishable on facts. The emphasis of the ld. counsel for the assessee was on the decision of ITAT in the case of Tanvir Collections (P) Ltd. vs. ACIT 54 taxmann.com 379 (Delhi-Trib). In this case the ITAT has dealt with a similar situation, where the AO was happened to be a common AO. The argument of the ld. Departmental Represent....
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....e continued the enquiry and issued summons to one of the directors happened to be a common director in these five donor companies. Shri Prabir Banerjee son of late Nityananda Banerjee appeared before the AO and his statement was recorded on 15th March, 2013. He has confirmed the donation to the Foundation. Thus the assessee has discharged its onus and the department has failed to bring any evidence on record demonstrating any concealment at the end of assessee. For buttressing his contention that statement of Shri Kamala Shankar Pandey ought not to be relied upon being not put for cross-examination, he relied upon the decision of Hon'ble Supreme Court in the case of Kishan Chand Chelaram 125 ITR 713. He drew our attention towards page 331 to 333 and 339 of the Paper Book Volume-2. He also made references to pages 144 to 148, 156 to 170, 86 to 103 of Volume -1. 22. On the other hand, the ld. DR submitted that 5 paper companies in a concerted manner passed resolution to convert the companies advances to KPC Foundation as corpus donation to KPC Medical College & Hospital. The assessee has created internationally multiple entities mainly as puppets in the hands of puppeteer and tried ....
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....t put to cross examination then his deposition cannot be used against the interest of any one, except the deposer. But in the present case ld. AO had issued notice u/s 142(1) on 3/10/2012 and called for details of donation with confirmation, PAN, and nature of donation. Now the assessee had offered the donation for taxation. The question of cross-examining Shri Kamala Shankar Pandey would have arisen, had assessee justified genuineness of its donations. Probably opportunity to cross examine could have been granted. But, when the penalty proceeding was initiated, by that time, Shri Pandey had died. Thus assessee, itself, by its conduct never indicated that this statement was false. In this back ground this statement may not be solely sufficient to charge the assessee with a liability but it will not lose its credibility of a corroborative information. There is no strict rule of law against its admissionability, but its only a rule of prudence, that nobody should be charged with liability on the basis of statement of third person unless opportunity of cross examination is given Thus we take this statement as an information with the AO, which is required to be substantiated. We will r....
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....rs, in our opinion, on papers, the assessee might have fulfilled the proforma but on reality check, all these companies are apparently bogus. We could appreciate the contention of the ld. counsel that some donation was flowing to the assessee from a very renouned Medical College or a big industrial house. The unknown private limited companies not doing any business, do not have asset of more than 1 lakcs, all of a sudden gave a donation of Rs. 33 crores is quite unbelievable. These are the hard facts flowing from the accounts of 5 companies. They do not require corroborative support from the statement of Shri Kamala Shankar Pandey. 25. Let us test on different analogy also. The Explanation-1 appended to section 271(1)(c), create a deeming fiction, which postulates two situations; (a) where in respect of any facts, material to the computation of total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the AO, & (b) where in respect of any fact material to the computation of total income under the provision of the Act, the assessee is not able to substantiate the explanation and failed....
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....n and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by the assessee. These two situations provided in Explanation 1 appended to section 271(1)(c) makes it clear that that when this deeming fiction comes into play in the above two situations then the related addition or disallowance in computing the total income o....
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....ttention towards section 251 of the I.T. Act. Sub-section (1) provides that in disposing of an appeal the Commissioner shall have the following powers. Sub-clause (b) of section 251(1) is relevant for our purpose which reads as under :- (b) in an appeal against an order imposing a penalty he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty. A perusal of the above would indicate that powers of the Commissioner while dealing with penalty appeal are restricted to the penalty proceedings only. He may confirm or cancel the imposition of penalty. He may enhance or reduce the penalty. He cannot give direction to the AO for exploring the additions in an assessment. Direction given by the ld. Commissioner in pargraph 6.3 to 6.7 are contrary to the provisions of law and, therefore, this finding of the ld. CIT(A) is quashed. The penalty imposed by the AO in the cases of KPC Medical College & Hospital is confirmed in all the three years. The appeals are treated as partly allowed for statistical purpose. 29. Now we take ITA No.1835/Kolkata/2014 - In this case, the assessee did not file the return within the due date provided under section 139(1) of....