TaxTMI 
TaxTMI 
2016 (9) TMI 1509
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....ssessment was made by bringing the amount of share capital of Rs. 25 lacs subscribed to during the year by five persons, as under, to tax u/s.68 of the Act, besides another disallowance for Rs. 46,000/-: S. No. Name of individual Amount raised (Rs.) Remarks 1. Prabhulal Velgi Galal 5,00,000/- Shares purchased by Rita Tanna 2. Jignesh Doshi 5,00,000/- Shares purchased by Rita Tanna 3. Tukaram Utekar 5,00,000/- Shares purchased by Vijal Shah 4. Usha Kiran Bhosale 5,00,000/- Shares purchased by Vijal Shah 5. Harish Manilal Shah 5,00,000/- Shares purchased by Rita Tanna The Assessing Officer (AO), after recording the gist of the statements of all, save one (Jignesh Doshi, being untraceable), persons, i.e., including the two persons who purchased the shares from the original allottees, issued his findings qua the capacity of the creditors as well as the genuineness of the said credit transactions, including the subsequent transfer of shares, as under, adding the entire credit vide assessment order u/s. 143(3) dated 29/12/2008: (at pgs. 3-4 of the assessment order) 'From the above depiction of facts i....
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....m these persons and then they were utilized for extending share capital. There is very little doubt left with regard to the genuineness of the transaction and the creditworthiness of the applicants of the share capital.' 3. The assessee has not sought any opportunity to examine these witnesses therefore it is assumed that he has nothing to say in this regard. Further Sh. Chandra Kant Tanna, Director of the company, vide his letter dated 29.12.08 has offered the amount of Rs. 25 Lacs as income in the hands of the company for the year under consideration.' 3.2 Penalty proceedings u/s. 271(1)(c) of the Act were also initiated vide the said assessment order. In penalty proceedings, initiated thus, the assessee raised further contentions vide its letter dated 18/6/2009, as under: '1. The assessee has contended that since it has voluntarily offered the income for taxation, there is no concealment of income and hence no penalty is leviable. 2. The shareholders are assessed to tax. 3. The copy of bank statement has been furnished indicating the sources of fund. 4. As per the decision of the Hon. Supreme Court in the case of Lovely Exports Pvt. Ltd. the addition of share C....
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....ntary. The penalty being confirmed thus, the assessee is in second appeal. 4. Before us, the assessee chose to argue its case on three distinct legal issues, relying for each on several decisions. 5. We have heard the parties, and perused the material on record. We shall take up each of the three issues in seriatim, as follows. 5.1 The first legal issue agitated is as under: A) Notice u/s. 274 show causing the assessee as to why the penalty u/s. 271(1)(c) of the Act ought not to be levied thereon did not cancel either of the two grounds, i.e., furnishing inaccurate particulars of income or the concealment of income, for which penalty under the said section is leviable. It is argued that the two carry different connotation, so that non deleting or nonchoosing of any one of them would amount to vague and therefore a defective notice, following the proceedings. Reliance is placed on CIT vs. Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 (Karn); CIT vs. Steel Centre [2014] 51 Taxman 127 (Kar), besides others by the tribunal. The Revenue, on the other hand, relies on the decisions in CIT vs. Smt. Kaushalya & Others [1995] 216 ITR 660 (Bom); and CIT vs. Mithila Mot....
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.... is only an administrative device to effect the communication, and provide opportunity of hearing, penalty proceedings cannot be assailed. In the present case, not only is the assessee well aware of the nature of charge against him, i.e., of the transactions being bogus and, in any case, of he being unable to prove, much less satisfactorily, the impugned credits, i.e., as being genuine, but also participates in the said proceedings, responding to the same - filing their confirmations and the statements. This being the crux of the matter, is in fact more comprehensible to the assessee than the terms 'concealment of particulars of income' or 'furnishing inaccurate particulars of income', which are technical terms, with the Act further deeming 'concealment' under certain circumstances. In-as-much as the assessee has abysmally failed to explain the impugned credits - which it is required to in law satisfactorily, it is deemed to have 'concealed particulars of income'. The same is also liable to be construed as 'furnishing inaccurate particulars of income'. Though carrying different connotations, the possibility of an overlap of the two cannot be excluded. The assessee in fact owns up t....
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....gers to the company, barely eking out a living, invest in a private company, shares of which are highly illiquid. That is, there is under the circumstances considerable doubt as to they having chosen to become share-holders of a company, of the business of which or investment potential of which, nay, the nature of investment in which, they have no clue. Further, the shares stand acquired by another set of persons, who are equally unable to explain the source of their investment. Was there, one wonders, a prior arrangement between the two; the subscribers having lent their names, providing as it were, an accommodation for the interim period. Rather, as it appears from their statements; they having no knowledge, much less capacity or even understanding of the transaction/s, their names as well as bank accounts were used for the purpose. Both the nature and source of the credit being unexplained, the genuineness of the credits is completely unproved. As regards any ambiguity as to qua which of the two adjustments to the returned income, i.e., the disallowance of Rs. 46,000/- or addition of Rs. 25 lacs, the penalty stands initiated, as contended before us by the ld. AR, the same onl....
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....lly, even as even one ground would suffice. We have, when we state so, also considered the assessee's reliance on CIT vs. MWP Ltd. [2014] 264 CTR 502 (Kar) wherein it stands held that where at the end of the assessment order, it is written 'Penalty under section 271(1)(c) be initiated separately', or words to that effect, the same did not constitute a direction u/s.271(1)(c) for the purpose of levy of penalty there-under. The decision is itself based on two decisions, viz. Manjunatha Cotton & Ginning Factory (supra) and Madhushree Gupta v. UOI [2009] 309 ITR 143 (Del), and clarifies that even post amendment, the said satisfaction should be discerned in/from the assessment order and the words by which the same is expressed is not relevant. We have in this order repeatedly emphasized of the assessment order (as well as the penalty order) in the instant case being both comprehensive and unequivocal in the matter, i.e., of a complete failure on the part of the assessee to furnish any explanation qua the relevant parameters, i.e., capacity and genuineness, with one person being not 'traceable', so that in respect of credit ascribed to him, even identity is not proved, leading to the inf....
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....t came heavy on the tendency or mischief of what is called 'voluntary disclosure', stating that the same does not absolve the assessee to discharge the burden of proof on it, meeting the statutory presumption against it by adducing cogent and reliable material/evidence. The assessee has failed to adduce any evidence to rebut the clear and cogent findings qua capacity (of the creditors) and the genuineness (of the credit transactions), which are unproved, if not disproved, by the material on record, including the admission by the creditors, with the assessee, per its disclosure, owning up the credits, admitting the impugned sum as its income. The decisions in the case of Mak Data (P.) Ltd. (supra) and K. P. Madhusudhanan vs. CIT [2001] 251 ITR 99 (SC), among others, which clarify the settled position in the matter, are clearly applicable in the present case. 5.4 Finally, we find decisions advancing the proposition that where a conditional offer is made, i.e., of non-levy of penalty, to buy peace, no penalty u/s. 271(1)(c) can be levied. The legal position in the matter stands settled in Mak Data (P.) Ltd. (supra), clarifying that making such a conditional offer does not provide a....