TaxTMI 
TaxTMI 
2014 (1) TMI 1682
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....ed return and further including disallowance u/s.40A(3) of Rs. 4,940/- and disallowance of excess expenditure of Rs. 61,500/-. A notice for penalty under section 271(1)(c) of Income Tax Act was issued along with assessment order. In response to the notice issued, explanation was filed wherein it was submitted that the assessee always cooperated with the department in all respects for smooth completion of assessment and there was no failure on part of assessee to comply with the provisions of the Act. It was further submitted by assessee that there was no willful concealment of income or furnishing of inaccurate particulars. A.O. after considering the explanation of the assessee found it to be not acceptable as he was of the opinion that but for survey operations carried out, additional income would not have come to the light. Thus, A.O. held that assessee tried to conceal particulars of income which were detected during survey. In view of the above, A.O. held that the tax payable on additional income offered during the survey attracts the penalty provisions u/s. 271(1)(c) as the same is 'concealed income'. A.O. further relied on the Judgment of Hon'ble Supreme Court in the case of ....
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....n'ble Allahabad High Court Judgment in the case of Bhairav Lal Varma vs. Union of India 230 ITR 855. 4.2. On the issue of revised return, the learned CIT(A) relying on the Judgment of Hon'ble Madras High Court in the case of P. Govindaswamy vs. CIT 244 ITR 510, Hon'ble Gujarat High Court Judgment in the case of LMP Precision Engg. Co. Ltd. vs. DCIT 330 ITR 93 and Hon'ble Jharkhand High Court Judgment in the case of CIT vs. Mahabir Prasad Bajaj 298 ITR 109 came to the conclusion that assessee has filed revised return which is not consequent to any bonafide omission but because of detection of concealment by the department. 4.3 With reference to the contention that there is no finding by the A.O. that there is willful concealment, the learned CIT(A) relied on the case of Hon'ble Madhya Pradesh High Court in the case of DCIT vs. Chirag Metal Rolling Mills Ltd. 305 ITR 29 to observe that where income is surrendered by an assessee, no separate enquiry is necessary before imposing penalty. 4.4 With reference to the contention that burden of proof is on the Revenue which is not discharged, the learned CIT(A) relying on the various case law came to the opinion that there is no onu....
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.... the first time before the Tribunal. Therefore, it becomes an additional ground even though stated in the main grounds of appeal memo. 6.1 We have considered the rival arguments and after giving opportunity to the learned DR and considering the principles on the issue, we admit the ground and decide the issue in the course of this order. 7. Learned Counsel placed his arguments in detail and referred to various case law. It is the contention of the learned Counsel that the notice issued under section 271(1)(c) itself is invalid and consequently, the entire penalty proceedings are to be held as abinitio void (ground No.5). 8. Without prejudice to the above, it was submitted that the assessee filed revised return under a bonafide belief that no penalty will be levied in respect of additional income offered in the revised return and in the revised return the assessee has admitted higher income even though it has various expenditure, in order to settle the matters and even before the return was filed, assessee has paid the taxes on the assurance of survey party. Therefore, the action of the assessee is bonafide and penalty is not leviable. 9. Dealing with the above issues, l....
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....e, as it was under bonafide impression that 271(1)(c) proceedings were initiated for the additions made in the assessment order itself. Learned Counsel further submitted that assessee paid taxes of Rs. 50 lakhs on 24.10.2008, Rs. 10,85,000/- on 07.11.2008 ie.., before filing the return on 28.11.2008 offering additional income of Rs. 1,50,69,196/-. 10. Learned Counsel further referred to the statement recorded under section 133A to submit that the Managing Partner accepted the additional income even though he clearly stated that there was expenditure. Since there is an assurance by the survey unit, assessee has accepted the additional income without claim of expenditure and assessee can justify that penalty is not leviable if the claim of expenditure was verified and allowed. It was his contention that learned CIT(A) without calling for any remand report on the additional expenditure claimed which was therein in the impounded material available with the department, rejected the contentions without examination. It was his submission that assessee even though has not earned that much income, accepted higher income in order to close the matters and immediately paid the taxes to just....
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....e case of CIT vs. Manjunath Cotton and Zinning Factory and others 359 ITR 565 submitted that proceedings are bad in law as both the limbs of the notices were struck-off. Since, there is no application of mind at the time of initiation of penalty, following the principles laid down by the Hon'ble Gujrath High Court in the case of Panna Corporation (supra), the proceedings are bad in law. Further, it was the submission that entire on money cannot be taxed and what is to be taxed can only be the income part of it. Referring to the statement given at the time of survey, learned Counsel submitted that there is expenditure which was also available from the impounded material and assessee has discharged his initial onus by giving a bonafide explanation that expenditure has to be reduced. The initial onus of bonafide explanation having been discharged by the assessee and has not been counterred by the Revenue, assessee's bonafide explanation has to be accepted. 12. Learned D.R., incidentally happens to be CIT(A) who passed the order, has defended the order by referring to various case law and the facts of the case. While accepting that the A.O. struck down relevant columns in the statut....
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....CASE : Before adverting to the decision on the merits of various contentions, it is appropriate to place the facts on record. Admittedly, the assessee has filed the return of income on 18.10.2007. As per the A.O. the admitted income was taken as Rs. 19,09,356/-. This statement of the A.O. both in the assessment order as well as in the penalty order is not correct. As seen from the copy of the return placed in the paper book from pages 1 to 14, Assessee has gross total income for the year at Rs. 71,76,397/- and after set off of carry forward losses and depreciation to the extent of Rs. 52,67,041/-, declared total income at Rs. 19,09,356/-. However, assessee having positive income, has offered the income under section 115JB at Rs. 71,98,828/-, which is the deemed 'total income' under the provisions of section 115JB. Nowhere in the Orders A.O. referred to the incomes under section 115JB and calculated the levy of penalty on the normal income of Rs. 19.09,356 ignoring the higher income of Rs. 71,98,828 offered under section 115JB of the Act. 13.2. After filing of the return of income, assessee's premises were covered under section 133A on 11.09.2008 i.e., within one year from the....
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.... found that the assessee has made cash payment in excess of Rs. 20,000/- totaling to Rs. 24,700/-. Out of this 20% works out to Rs. 4,940/- which is not allowable expenditure for the A.Y. 2007-08, hence this amount is to be disallowed u/s.40(A)(3). As seen from the possessory agreement -cum- sale with GPA in Venkateswara Nagar Gandigundam venture, registration expenses shown vide registration document dated 06.03.2007 No. 2098, actual expenses incurred Rs. 50,500/- instead of Rs. 1,12,000/- shown in the books of accounts. The difference of excess expenditure shown Rs. 61,500/- is disallowed and added to the return of income." 13.3. Thus, as can be seen from the assessment order, there is no discussion about any of the issues on which the penalty is being levied. Even though, proceedings under section 271(1)(c) are initiated as stated in the assessment order, copy of the order sheet placed by the learned CIT-DR in the paper book does not indicate initiation of penalty proceedings at all. The order sheet dated 22.12.2009 states the draft assessment order in this case was approved on facts and material brought to notice and initialed by an Officer (designation not known). Below ....
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....n of the proceedings. We had not failed to comply the provisions of the Act. We further wish to submit that the proposed levy of penalty u/s.271(1)(c) is not proper as there was no willful concealment of income or filing of inaccurate particulars by us. Your goodself has made the addition to the returned income by disallowing the expenditure. Hence there is no suppression of income on our part." 13.6. As can be seen from the above, the assessee was under bonafide impression that the proceedings under section 271(1)(c) were initiated for the additions to the returned income which are small disallowances. 13.7. Coming to the assessee's contention that it has bonafidely offered the higher income than actual income without claiming expenditure, this issue was also require examination. As can be seen from the statement recorded by the Officer in the course of survey proceedings (name of the Officer and designation is not available in the statement), assessee has given a preliminary statement on 11.09.2008 and followed it up on 12.09.2008 and further on 22.09.2008. The A.O. accordingly referred to the statement dated 22.09.2008 in question No. 6 and 7. Which is as under : "Q.....
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..... 160/- per sq. yard multiplied by 95,000 sq. yards sold during the year comes exactly to Rs. 1,52,00,000/-. However, for the transaction in Sai Garden in Parwada ,which is in the impugned assessment year, the difference amount of Rs. 250/- per sq. yard on 60,612 sq. yards sold area does not come to Rs. 1,50,69,196/- (actual amount should have been Rs. 1,51,53,000/-). Thus, there is evidence with reference to actual receipt of the amounts available to the survey party, while determining the above amount. If those documents were examined, assessee's contention that it has unexplained expenditure also could have been verified by the A.O. Unfortunately, neither the survey party gave the working how it arrived at the above amount quantified in the sworn statement nor the A.O. discussed any thing about the quantification of the above amount in the assessment order as discussed earlier. In view of this, we cannot at this point of time, arrive at a conclusion that so much of the amount has been concealed by the assessee. As rightly held by the Hon'ble Gujarat High Court in the case of Panna Corporation (supra), what is to be brought to tax can only be the profit/income element in a transa....
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....e 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." Section 274 deals with procedure to be followed before imposing penalty under Chapter XXI. It reads as under : "274. Procedure.-(l) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard. (2) No order imposing a penalty under this Chapter shall be made - (a) by the Income-tax Officer, where the penalty exceeds ten thousand rupees ; (b) by the Assistant Commissioner or Deputy Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Joint Commissioner. (3) An income-tax authority on making an order under this Chapter imposing a penalty, unless he is himself the Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer." 14.2. Section 271 is a specific provision providing for imposition of penalties, and is a complete code in itself, regulating the procedure for the imposition of penalties prescribed. ....
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.... to be concealed so as to attract the penalty provisions. Explanation 1 sets out the circumstances which justifies levy of penalty. It reads as under : "Explanation 1.-Where in 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 Commissioner 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 bona fide 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 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." 14.6 After insertion of Explanation 1 to section 271(1)(c), the law on concealment and penalty has become stiffer. The Explanation as it stands now is a complete code having the following features : (1) Every difference between r....
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....ccurate particulars of such income. The ingredients which go to make up the conditions precedent to the infliction of penalty are : (i) the Assessing Officer or the Commissioner (Appeals) in the course of a proceeding before him must be satisfied that an assessee has concealed or furnished incorrect particulars of his income ; (ii) there must be a determination by the Assessing Officer or the Commissioner (Appeals) that the assessee has concealed or furnished inaccurate particulars of his income 14.9 It is already held in various judicial precedents that a mere addition in the assessment does not ipso facto lead to levy of penalty. The penalty under section 271(1)(c) can be levied only with two conditions prescribed for levy of penalty are satisfied. One such condition is for concealment of income and other for furnishing of inaccurate particulars of such income. These two are distinct limbs. It has already been held in various judgments that when an item has not been shown at all, it would fall in the limb of concealment and an item which has been shown in the return, but wrongly would come under the limb of furnishing of inaccurate particulars of income. It is clear from....
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....automatic. (k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by the authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the Assessing Officer in the assessment order. (l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bona fide, an order imposing penalty could be passed. (m) If the explanation offered, even though not substantiated by the assessee, but is found to be bona fide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. (n) The direction referred to in Explanation 1(B) to section 271 of the Act should be clear and without any ambiguity. (0) If the Assessing Offi....
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....tatute under Expalnation-1 to Section 271(1)(c). The question is whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to section 271(1) raises a presumption of concealment when there is difference between reported and assessed income. The burden is then on the assessee to show otherwise by cogent and reliable evidence. When the initial onus placed by explanation has been discharged by him, the ownership of the revenue to show that the amount in question constitute the income and not otherwise. 14.12. Therefore, even though the assessee may declare the incomes by using the words voluntary disclosure to buy peace and to avoid litigation, amicable settlement etc., under the provisions what is to be seen is, whether the assessee had given any bonafide reasons initially placed by Explanation to section 271(1)(c). 14.13. Further, Coordinate Bench in the case of DCIT vs. Dr. Satish B. Gupta reported in 42 SOT 48 had also analysed the provisions of section 271(1)(c) with reference to the "amount added" or "disallowed in computing the total income". The Coordinate Bench has considered the ....
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....ch as under s. 142(1) or under s. 143(2). Carrying out survey under s. 133A is not at all any proceedings. Proceedings as used in s. 271(1)(c) are statutory proceedings initiated against the assessee either by issuance of statutory notice or after filing of return of income. Survey under s. 133A or search under s. 132 or issuance of notice under s. 133(6) for example, are only means of collecting evidence against the assessee and are not equivalent to statutory proceedings. Another criteria of finding out as to whether particular action is a statutory proceeding or not it is to be seen whether it can be brought to a legal conclusion against the assessee by determining his right or liability. Merely carrying out survey under s. 133A does not create any liability against the assessee which is created only through assessment proceedings or penalty proceedings. Therefore, the Departmental Representative is incorrect in his submission that survey being a proceeding and AO has discovered concealment during survey, therefore, the assessee is liable for penalty under s. 271(1)(c). Further cl. (c) to s. 271(1) mentions "as concealed.......or furnished". They are past tense words indicating ....
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....nitiated the penalty proceedings. In this case the assessee has not disclosed the entire amount of additional income during the search time; the additional income is unearthed by the assessing officer during the proceedings under section 143(3) of the Act. But assessee case is different from the above referred case. Assessee had offered the entire amount of additional income during the survey proceedings. The assessing officer during the proceedings under section 143(3) of the Act simply relied on the additional income offered. The assessing officer did not unearth any additional income during the assessment time, nor even examined the impounded material. Hence the above case law does not apply to the present case as it pertain to different facts. 15.3 The case of C. Christopher v. CIT [2004] 140 TAXMAN 485 (MAD) As per the facts of the case, though the assessee has expressed his desire to settle the tax matters with the department by making disclosure, but no disclosure was made on the day of the search, or before the search was completed. No statement was given by the assessee under oath under section 132(4). Thereafter, the assessee made a disclosure on a later date and....
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....ntial ingredient for attracting penalty u/s 271(1)(c), the most important requirement to levy penalty u/s 271(1)(c) is the record and the said record should sustain the finding that, there had been concealment. But in assessee case, the team had impounded lot of material during the survey proceedings, the assessing officer simply relied on the revised return filed by the appellant. Hence, the above said case law, which the assessing officer had relied to levy penalty does not apply to the case. More over the above case was distinguished by Hon'ble Supreme Court in later judgement. 15.6. Thus, the case law relied by A.O. does not apply to the facts of the case. 16. FINDINGS : 16.1. If we examine the facts of the case, keeping in mind the above principles, it is very clear that the A.O. has not recorded any satisfaction in the assessment order about the concealment nor followed the procedure under section 274 with reference to the grounds mentioned in section 271(1)(c) whether the notice issued is for the concealment of income or for furnishing of inaccurate particulars. Having deleted appropriate paras in the notice, sending a printed form particularly deleting the relevant....
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.... of income made by the assessee company in revised return and the explanation that it had done so to buy peace with the Department and to avoid protracted litigation was accepted by the AO in his order dt. 16th March, 2001 without raising any objection. Admittedly the AO accepted the returns filed by the assessee after verification of the information filed and books of accounts produced. Thus, the assessment was completed accepting the returned net income as per the revised return of income. Not only the assessment order did not reflect any satisfaction as required under s. 271(1) but even the show-cause notice was silent with reference to the satisfaction arrived at by the AO with reference to the concealment of income by the assessee company. Nothing has been placed before this Court by the Revenue to show that any other material was available with the AO to the effect that the assessee concealed the income. In the circumstances, it is not open to the AO to invoke the power under s. 271(1)(c) levying penalty. The impugned penalty proceedings are without jurisdiction apart from being arbitrary and illegal." 16.3 . Respectfully following the above Judgment of the jurisdictional ....