TaxTMI 
TaxTMI 
2016 (8) TMI 224
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....ting the penalty u/s 271 (1 )(c) of the Income Tax Act at Rs. 45,00,000/- after holding that just because assessee could not prove his sub tenancy that does not automatically mean that the appellant has furnished inaccurate particulars of income without appreciating the facts that offering income either under the head of "Income from other sources" or "Capital Gain" incurs substantial effect on allowability of deductions u/s 54F of the IT Act and the rate of tax, thus the treatment of the income under different head can be intentional to reduce the tax liability which can also well be termed as furnishing of inaccurate particulars of income. 2. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has failed to appreciate the facts that offering income after selection of return for scrutiny establishes the intention to avoid the tax liability which cannot be covered under the category of particulars of bonafide mistake which can also well be termed as concealment of particulars of income or furnishing of inaccurate particulars of such income. 3. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the AO be res....
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....e assessee , and he also did not obtain any license for the business carried on by him from the said property under the Shops and Establishment Act. The assessee gave to the AO present address of Sh Rajni C. Shah. The assessee submitted the copy of Deed of Surrender of Tenancy dated 12th April, 2007 executed by him with the Second Land Developers Private Ltd registered with Sub-Registrar, Mumbai City. The said registered document also had an affidavit of original tenant , layout plan of office occupied, letter dated 6th March, 2007 from original tenant confirming the premises given for business purpose to the assessee in 1995 and letter of possession dated 12th April, 2007 given by the assessee to M/s Second Land Developers Private Ltd. The A.O. observed that the assessee has not been able to submit any details in respect of the sub-tenancy which he acquired in the year 1995 or any documentary proof of conducting any business in the said property from the year 1995 to 2007. The AO observed that primary onus is on assessee to prove sub-tenancy and in the absence of any contemporary evidence, the AO disbelieved the claim of the assessee with respect to sub-tenancy of the said premise....
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....ted vide letter dated 22-12-2010 before the AO the revised statement of income wherein he surrendered the claim of deduction u/s 54F of the Act before the AO and showed the income under the head 'income from other sources' as surrender of tenancy rights. The assessee counsel accepted before the AO on 14-12-2010 that he did not have any proof / evidence to support the sub-tenancy. The assessee also further stated in the letter dated 22-12-2010 that in fact the assessee helped in relation to sale of the premises at Worli by M/s Leach & Weborny to M/s Second Land Developers Private Ltd. The AO observed that the assessee is an estate broker and the assessee used a colorable device to avoid tax liability and indulged in tax evasion by fraudulently claiming the exemption u/s 54F of the Act, hence, relying upon the decision of Hon'ble Supreme Court in the case of Mc Dowell & Co. Ltd. v. Commercial Tax Officer, 154 ITR 148(SC) additions were made to the total income of the assessee vide assessment order dated 29-12-2010 passed u/s 143(3) of the Act. The assessee did not contest the said assessment order dated 29-12-2010 passed by the AO u/s 143(3) of the Act as no appeal was filed by the a....
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....aim of exemption u/s 54F of the Act to which the assessee otherwise was not eligible, resulting into concealment of income. The AO after relying upon the decision of Hon'ble Supreme Court in the case UOI v. Dharmendra Textiles Processors and other (2007) 295 ITR 244(SC ) , held that the assessee has filed inaccurate particulars of income and thereby concealed the particulars of income within the meaning of Section 271(1)(c) read with explanation 1 of the Act and levied the penalty vide orders dated 11-05-2011 passed u/s 271(1)(c) of the Act. 4. Aggrieved by the penalty order dated 11-05-2011 passed by the A.O. u/s 271(1)(c) of the Act, the assessee filed appeal before the learned CIT(A). 5. Before the ld. CIT(A), the assessee reiterated the submissions what were made before the AO which are not repeated for the sake of brevity. The assessee submitted that the assessee's main source of income has been as a working partner in Nevron Properties and Estates engaged in the business of real estate brokerage. The assessee submitted that in course of his business, the assessee came into contact with Mr. Rajni C. Shah who was the original tenant of M/s Leach and Weborney occupying a porti....
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....ansactions are at arm's length. It was stated by the assessee before the learned CIT(A) that the A.O. acted upon suspicion, conjectures and surmises and there is no material before the AO to come to conclusion that the said Second Land Developers Private Limited paid Rs. 1,13,73,000/- for reasons other than obtaining vacant possession of the portion occupied by the assessee. It was submitted that reliance of the AO on information received from BEST and BMC has no relevance for determining the claim of the assessee that he was occupying the portion of the premises as sub-tenant since the year 1995. The assessee referred to the provisions of section 271(1)(c) of the Act and submitted that no penalty can be levied against the assessee. The assessee submitted that the he had withdrawn the claim of deduction u/s 54F of the Act and offered the receipt of Rs. 1,13,73,000/- on surrender of tenancy as income from other sources instead of being charged to tax as long term capital gains voluntarily with a view to end protracted litigation with Revenue and to buy peace of mind subject to the condition that no penalty u/s 271(1)(c) of the Act will be levied by the Revenue on the assessee. The a....
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....d by the AO on the assessee u/s 271(1)(c) of the Act. The assessee has claimed long term capital gains in the return of income filed with the Revenue on the alleged purported sale/surrender of sub-tenancy rights and claimed deduction u/s 54F of the Act on the said long term capital gains allegedly and purportedly earned on sale/surrender of sub-tenancy rights which sub-tenancy never actually existed and was merely a colorable device adopted by the assessee to evade taxes . The ld. D.R. relied upon the order of the A.O. and submitted that enquiries were made with the BEST and BMC which revealed that the assessee did not had electricity connection in his name in the said property nor the assessee paid taxes with respect to the said property. The ld. DR submitted that the assessee also did not paid any rent with respect to sub- tenancy of this property. No evidence has been produced with respect to the existence of the said sub-tenancy. The assessee never reflected sub-tenancy in its books of assets in assets nor any expenses were ever claimed with respect of said sub-tenancy towards rent, taxes , electricity etc. . Summons were issued u/s 131 of the Act to Shri Rajni C. Shah , the or....
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....upreme Court in the case of MAK Data (P) Ltd. v. CIT [2013] 38 taxmann.com 448 (SC) and submitted that it was an ex-facie bogus claim of the assessee to contend that the assessee was sub-tenant of Sh. Rajni C. Shah since the year 1995 , and in-fact the deed of surrender of tenancy right dates 12-04-2007 was a colorable device adopted by the assessee to claim long term capital gains to claim deduction u/s. 54F of the Act and evade legitimate taxes due to Revenue. The ld DR supported the order of the AO and prayed that the order of the learned CIT(A) be set aside and penalty levied on the assessee on this count be confirmed. 8. The ld. Counsel for the assessee submitted that there was a surrender of sub-tenancy with respect to portion of property situated at 66, Off E. Moses Road, Lower Parel, Mumbai. The deed of surrender of tenancy dated 12-04- 2007 was a registered and stamped deed between the assessee and the buyer Second Land Developers Private Ltd. wherein the original tenant Shri Rajni C. Shah was the confirming party. It was submitted that the Second Land Developers Private Ltd. purchased the premises along with tenants and sub- tenants wherein the assessee was sub-tenant of....
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....n suspicion , conjectures and surmises with respect to the amount received on surrender of tenancy rights. The ld. Counsel drew our attention to the revised computation of income which is placed at paper book page 27. It is submitted that the assessee has not admitted that the amount was not received on surrender of tenancy which now is offered to be taxed under the head 'income from other sources' instead of being taxes as income from long term capital gain as the assessee did not have contemporary evidences to prove sub-tenancy . It is submitted that the withdrawal of claim of deduction u/s 54F of the Act was made with the conditions that no penalty will be levied by the Revenue u/s.271(1)(c) of the Act. The ld. Counsel distinguished the case law relied on by the ld. D.R. in the case of MAK Data (P) Ltd(supra). and Virender K Mehta(supra). The ld. Counsel for the assessee relied upon following decisions : 1. CIT v. Reliance Petroproducts Private Limited (2010) 322 ITR 158(SC) 2. CIT v. Suresh Chandra Mittal (2001) 251 ITR 9(SC) 3. CIT v. Suresh Chandra Mittal (200) 241 ITR 124(MP) 4. UOI v.Rajasthan Spinning and Weaving Mills (2009) 224 CTR1(SC) The learned counsel reite....
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....osts in relation to the working from the said premises such as telephone, electricity , taxes to BMC etc. were to be paid by said Mr. Rajni C. Shah. On being called upon to prove his sub-tenancy with respect to the afore-stated premises, It was the contention of the assessee that he is not having any contemporary evidences to prove the actual occupation and usage of the said premises by the assessee since the year 1995 when Mr. Rajni C. Shah, original tenant of the said premises purportedly gave him permission and allowed him to occupy and use the said premises till the date of execution and registration of deed of surrender of tenancy on 12-04-2007. Further,it is the submission of the assessee that he did not have any written sub-tenancy agreement with Mr. Rajni C. Shah who was the original tenant of the said premises/property and said Mr. Rajni C Shah orally granted him permission in the year 1995 to occupy and use the afore-stated premises to do business together . The assessee could not produce any contemporary evidences such as sub-tenancy agreement executed with Mr Rajni C Shah in the year 1995, telephone bills, electricity bills, proof of payment of taxes to BMC etc to prove....
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....ome before the AO wherein the said amount was declared as 'income from other sources' on surrender of tenancy rights. The assessee earlier made an claim of deduction u/s 54F of the Act of Rs. 1,13,73,000/- from income from long term capital gains on surrender of tenancy which was withdrawn as now the income is offered for taxation as 'income from other sources' and obviously deductions u/s 54F of the Act is not available on the income chargeable to tax under the head 'Income from other sources' as per the scheme of the Act. The assessee is a real estate agent and broker being partner in M/s Nevron Properties and Estates which is engaged in the business in estate agencies and brokerage , whereby the assessee also admitted to have handled the deed of sale of the said property whereby the Second Land Developers Private Ltd. purchased the said property from M/s Leach and Weborney. The assessee submitted that he is voluntarily surrendering his afore-stated claim in order to avoid long and protracted litigation with Revenue and in order to buy peace of mind, provided no penalty be levied against the assessee u/s 271(1)(c) of the Act. Thus, in nut-shell the primary onus was on the assesse....
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.... said sub-tenancy towards rent, taxes , electricity etc. . The assessee on being cornered and confronted by the Revenue after detailed enquiry and investigation conducted by Revenue, surrendered his claim of treating the receipt of consideration of Rs. 1,13,73,000/- on surrender of tenancy from being treated as 'income from long term capital gains' and agreed to now bring to tax the said receipt as income under the head 'income from other sources' and also withdrew his claims of deduction u/s 54F of the Act . The assessee did not challenge the assessment framed by the AO u/s 143(3) of the Act in appellate proceedings and accepted the said assessment order passed by the AO which was passed after the assessee withdrew his afore-stated claims. In our considered view based on the facts and circumstances of the case, the assessee was never the sub-tenant of the said premises and the story has been concocted to reduce tax liability wherein the assessee entered into Deed of surrender of the tenancy dated 12-04-2007 as a colorable and sham device to receive the said amount of Rs. 1,13,73,000/- as income from surrender of tenancy of the said premises purported and allegedly to be in his occ....
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....e by way of deed of surrender of tenancy dated 12- 04-2007 to claim long term capital gains and deductions u/s 54F of the Act . The contentions of the assessee that he surrendered the claims as detailed above to avoid long and protracted litigations and to buy peace of mind is wrong and misleading as the assessee surrendered the claims on being cornered and confronted by the Revenue. The ratio of the decision of Hon'ble Supreme Court in the case of MAK Data (P) Ltd.(supra) and decision of Hon'ble Bombay High Court in the case of Virendra K. Mehta v. DCIT(supra) relied upon by the Ld. D.R. are clearly applicable in the case of the assessee as the assessee had camouflaged the real transactions by using colorable and sham devices by way of deed of surrender of tenancy dated 12-04-2007 to reduce tax liability , while the fact of the matter was that the assessee was never ever holding the sub-tenancy of the said premises or so called permission from Mr Rajni C Shah since the year 1995 to occupy and use the said premises and in-fact the said premises was never in occupation/possession of the assessee since the year 1995 till 2007. The claim of the assessee made in the return of income to....
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....ct. 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 a difference is noticed by the AO, 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 the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question constituted the income and not otherwise. 8. Assessee has only stated that he had surrendered the additional sum of Rs. 40,74,000/- with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income tax department. Statute does not recognize those types of defences under the explanation 1 to Section 271(l)(c) of the Act. It is trite law that the voluntary disclosure does not release the Appellant-assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved f....
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.... be no order as to costs." The Hon'ble Bombay High Court in the case of Virender K. Mehta v. DCIT in (2014) 50 taxmann.com 217(Bombay) held on almost similar facts that where assessee claimed that flats shown in return of income was acquired by surrendering his tenancy rights but failed to prove such tenancy rights , penalty levied under section 271(1)(c) of the Act was justified, as under: "6. After perusing the concurrent orders in this case, we are not impressed by any of these contentions. True, it is that the revenue has to prove that the ingredients or preconditions based on which imposition of penalty is permissible, are present and that is why the penalty is imposed. True, it is that the limited assistance can be derived from the quantum proceeding in such matters but one finds in the facts and circumstances of the present case, that the foundation or basis on which the assessee before us claimed the benefit was highly doubtful and questionable. The Assessing Officer, the Commissioner of Income Tax (Appeals) and the Tribunal all concurrently found that the explanation which was furnished by the assessee falls miserably short of the required standard in that it is not bon....
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....ing a turnover and certain income. That the ingredients of the return was not accepted by the Income Tax Officer. He noticed that there are several deposits and entered in the name of certain shop-keepers. The assessee's explanation was not found to be acceptable and it came to be rejected. The books of account were also rejected. In appeal before the Appellate Assistant Commissioner of Income Tax and before the Appellate Tribunal, the assessee succeeded in getting the assessed income reduced to Rs. 1,30,000/- in addition to book profits. That is how in the penalty proceedings, he urged that the penalty proceedings are quasi-criminal in nature. The burden of proof lay on the revenue to establish that the penalty was attracted and that intangible addition represented real income. That is how the Hon'ble Supreme Court reiterated the settled principles that penalty is a result of quasi-criminal proceedings and the want of proof is, therefore, strict and a test different than that of assessment proceedings has to be applied. There is no dispute and no quarrel about this legal principle but whether that has been satisfied or not will have to be decided and determined in the fact....
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....Revenue to be false and clearly explanation1 to Section 271(1)(c) of the Act is hit and the assesse is liable for penalty u/s 271(1)(c) of the Act, Similarly , in the judgment of Hon'ble High Court of Madhya Pradesh in CIT v. Suresh Chandra Mittal(supra) relied upon by the assessee which was also affirmed by the Hon'ble Supreme Court, the assessee surrendered the amount by filing revised return of income after persistent queries from the AO , which revised return of income was regularized by the revenue and where the asseseee contended that he surrendered the amount to buy peace and to come out of vexed litigation with the Revenue, it was held that explanation was bonafide and penalty is not exigible . This case is distinguishable as in this case of CIT v. Suresh Chandra Mittal(Supra) , the revised returns were regularized by the Revenue and also surrender was made on persistent queries by the AO whereas revenue did not discharged its burden of proving that there was concealment of income by the tax-payer in the said case and it rested its conclusion on the act of voluntary surrender by the tax-payer , while in the instant case before us, the Revenue made detailed enquiries and in....