Bachittar Singh S/O Mukhtiar Singh, ... vs Assessee

Bachittar Singh Vs. The Income Tax Officer, S/o Mukhtiar Singh, Ward-2, Shahabad. Kurukshetra. PAN: (Appellant) (Respondent)

Appellant by : Shri Tej Mohan Singh Respondent by : Shri S.K.Mittal, DR

Date of hearing : 16.02.2015 Date of Pronouncement : 16.02.2015

PER BHAVNESH SAINI, J.M. :

This appeal filed by the assessee is directed against the

order of the learned Commissioner of Income Tax (Appeals),

Karnal dated 2.9.2010 for assessment year 2003-04,

challenging the levy of penalty under section 271(1)(c) of the

Act.

2. Earlier this appeal was dismissed in default vide

order dated 11.5.2012. The assessee, however, moved

Miscellaneous Application explaining the reasons for non

appearance on the date of hearing, which was allowed and

accordingly, the appeal was re-fixed for hearing on merits. 2

3. Briefly, the facts as contained in the penalty order

are that in this case survey under section 133A of the Act was

conducted on 21.3.2003 at the business premises of the

assessee M/s Libas Emporium, Shahbad. During the course

of survey, the statement of the assessee was recorded in the

presence of his father Shri Mukhtiar Singh, brother Shri

Gurmeet Singh and counsel for the assessee Shri A.D.Gandhi,

Chartered Accountant. During the course of survey, a diary

called ghatta diary was found. On the same day, the

assessee made a surrender of Rs.24 lacs in his statement

which included Rs.19 lacs on account of investment in the

shop and balance Rs.5 lacs on account of excess stock. The

assessee filed return of income declaring an income of

Rs.6,67,690/- on 21.7.2003. The Assessing Officer relying on

the statement of the assessee made during the course of

survey made an addition of Rs.19 lacs on account of

investment in shop besides other additions to the declared

income on 31.3.2006. The Assessing Officer also initiated

penalty proceedings under section 271(1)(c) of the Act for

concealment of this income to the extent of Rs.19 lacs.

4. The assessee preferred an appeal before the learned

CIT (Appeals), Karnal, who vide order dated 5.12.2006

accepted the appeal of the assessee. The Revenue being

aggrieved filed second appeal before the I.T.A.T., Chandigarh

Bench and the Tribunal vide order in ITA No.224/Chd/2007

dated 18.6.2008 allowed the departmental appeal and

confirmed the order of the Assessing Officer. The Assessing

Officer asked for the explanation of the assessee as to why 3

penalty be not imposed on this addition. The assessee merely

stated that Miscellaneous Application is filed before the

Tribunal, therefore, penalty matter may be kept pending. The

assessee relied upon certain decisions in support that the

penalty may not be imposed. The Assessing Officer, however,

considering the facts and circumstances of the case noted

that the assessee himself admitted during the course of

survey that he has invested Rs.19 lacs in purchase of the

shop, however, the assessee later on retracted from the

statement. The statement was recorded in the presence of

learned counsel for assessee and his family members and

statement was given without duress, fear or pressure.

Therefore, the assessee has deliberately concealed the

particulars of income and accordingly, imposed 200% penalty

of the tax sought to be evaded.

5. The assessee challenged the penalty order before the

learned CIT (Appeals), who has vide impugned order confirmed

the levy of penalty and dismissed the appeal of the assessee.

6. We have heard the learned representatives of both

the parties and perused the material available on record.

7. The learned counsel for assessee submitted that the

appeal of the assessee on merit has been dismissed by the

Hon'ble Punjab & Haryana High Court and the decision is

reported in Bachittar Singh Vs. CIT & Another, 328 ITR 400

(P&H), in which the Hon'ble High Court has held as under: 4

The assessee in the course of survey under section 133A of the Income-tax Act, 1961 gave a statement on March 21, 2003 surrendering for taxation a sum of Rs. 19 lakhs. He stated that he had purchased a shop for Rs.24 lakhs jointly with his brother and the source of investment was not reflected in the books of account. Later, the assessee sought to resile from the statement made taking the stand that he had agricultural income to that extent and investment was from that source. The Assessing Officer rejected the contention of the assessee that he had done potato business which was evidenced by entries in a diary found during the survey holding that there was a long gap between the statement made originally on March 21, 2003 and retraction of the statement on May 28, 2003 and the stand taken was an afterthought. The Commissioner (Appeals) upheld the plea of the assessee that the earlier statement was incorrect and the resiled statement was supported by the diary recovoeoredo during the survey. The Tribunal reversed the view taken by the Commissioner (Appeals). On appeal :

Held, dismissing the appeal, that it was not disputed that the statement was made by the assessee at the time of survey, which was retracted on May 28, 2003 and he did not take any further action for a period of more than two months. In such circumstances, the view taken by the Tribunal that retraction of the earlier statement was not permissible, was a possible view. The mere fact that some entries were made in a diary could not be held to be sufficient and conclusive to hold that the statement earlier made was false. The assessee failed to produce books of account which may have been maintained during regular course of business or any other authentic contemporaneous evidence of agricultural income."

8. The learned counsel for assessee submitted that the

assessee has a reason for retracting from the statement

though it was not accepted by the authorities. He has,

therefore, submitted that the levy of penalty is unjustified and

in the alternate contention, submitted that levy of 200%

penalty is excessive in nature.

5

9. On the other hand, the learned D.R for the Revenue

relied upon the orders of the authorities below.

10. Considering the facts of the case in the light of the

finding of fact recorded by the Hon'ble Punjab & Haryana High

Court, it is clear that the addition of Rs.19 lacs has been

ultimately maintained against the assessee and the appeal of

the assessee has been dismissed by the Hon'ble High Court

also. Whatever plea was taken by the assessee for retracting

from the surrender made at the time of survey was not

accepted. Therefore, the finding of fact has reached finality

and addition of Rs.19 lacs is maintained. It is well settled

law that the findings given in the assessment proceedings are

relevant and have a probative value. The assessee has not

produced any fresh evidence or presents any additional or

fresh circumstances in the penalty proceedings. Therefore,

the penalty shall have to be confirmed against the assessee.

We rely upon the decision of the Hon'ble Delhi High Court in

the case of CIT Vs. Harparshad & Company Ltd., 328 ITR 53

(Delhi) in which it was held as under :

"Held, that the reasons given by the Tribunal for quashing the penalty proceedings were irrelevant, not germane to the issue and the Tribunal had lost sight of aspects which had been conclusively established in the quantum proceedings. The Tribunal had failed to take note of the fact that part of the claim as commission was allowed to the assessee not because R had rendered any rendered any services but because J had rendered services for which it was paid 1 per cent. of the commission by R out of the 3 per cent. Received by her. As far as commission to R was concerned, it was accepted by the Tribunal in the quantum proceedings that she did not render any service at all. The assessee had failed to offer 6

any explanation in respect of the addition of Rs.1,83,078 and it could be deemed to have concealed the particulars of income or furnished inaccurate particulars thereof, by virtue of this explanation. The Tribunal was not justified in deleting the penalty imposed by the Income- tax Officer under section 271(l)(c) of the Act.

The findings given in assessment proceedings are relevant and have probative value. Where the assessee produces no fresh evidence or presents any. additional or fresh circumstance in penalty proceedings, he would be deemed to have failed to discharge the onus placed on him and the levy of penalty could be justified.

Even if there is no concealment of income or furnishing of inaccurate particulars, but on the basis thereof the claim which is made is ex facie bogus, it may still attract penalty provision.

The Explanations appended to section 271(l)(c) of the Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The object behind enactment of section 271(l)(c) read with the Explanations indicate that the section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under section 276C of the Act."

11. The Hon'ble Bombay High Court in the case of Jyoti

Laxman Konkar Vs. CIT, 292 ITR 163 (Bom) held as under :

"The assessee had f iled a return f o r t h e assessment year 1999-2000 declaring an income of Rs.7,40,510. Not satisfied therewith, the Assessing Officer carried out a survey under section 133A of the Income-tax Act, 1961, and during the survey found that there was a discrepancy in stock to the tune of Rs.18,28,706 which was brought to the notice of the assessee, and the assessee filed a revised return disclosing additional income of Rs. 18,28,706. The Assessing Officer imposed penalty under section 271(1 )(c) and this was upheld by the Tribunal. On appeal to the High Court:

7 Held, dismissing the appeal, that the question whether there is concealment of income or not has to be decided with reference to the facts of a given case and the fact finding authorities under the Act having come to the conclusion that in the facts of the case, the assessee had concealed the income initially with a vieiw to avoid the payment of tax, the imposition of penalty was valid."

12. The Hon'ble Gujarat High Court in the case of LMP

Precisuion Engg. Co, Ltd. Vs. Dy.CIT (Assessment),330 ITR 93

(Guj) confirmed the levy of penalty because revised return

was filed after survey operation which showed concealment of

income and it was held as under :

"Held, that it was only after the statement of the chairman and managing director was recorded by the Deputy Director of Income-tax (Investigation), Mumbai, that the first disclosure dated October 20,1988, Rs.54,71,463 wa s made accompanied by another disclosure of Rs. 54 lakhs in a round figure being divided into three segments of Rs. 18 lakhs each for assessment years 1986-87, 1987-8 8 an d 1988-89. Th e revised return declarin g a su m of Rs. 78,56,613 came about as a consequence of follow-up proceedings under-taken by the Deputy Director of Income-tax in relation to the other three suppliers, viz., SC, NB and NPST. Therefore, the assessee could not be stated to ha ve voluntar ily c ome for w ard to disclose inc ome whic h ha d unintention ally been omitted fr om th e or ig inal r eturn of inc ome . Th e imposition of pena lty wa s va lid."

13. The Hon'ble Punjab & Haryana High Court in the

case of Ramesh Chander Gupta Vs. Income-Tax Appellate

Tribunal & Others, 344 ITR 320 (P&H) held as under :

" On August 5,1994, a survey was carried out under section 133A of the Income-tax Act, 1961, at the business premises of the assessee. Excess stock was discovered. An addition was made to the income of the assessee. Penalty was also imposed. The Tribunal upheld the order of penalty. On appeal to High Court:

8 Held, dismissing the appeal, that the Tribunal categorically held that the addition had not been made on the basis of estimate as recorded by the Commissioner (Appeals) but on actual physical verification of stock by the Assessing Officer during survey. The imposition of penalty was valid."

14. Considering the facts of the case in the light of the

above decisions and the decision of the Hon'ble High Court in

the case of the assessee himself, it is clear that the assessee

made surrender of Rs.19 lacs on account of unexplained

investment in shop during the course of survey. The addition

is ultimately maintained. The assessee failed to explain the

unexplained investment at every stage and, therefore, the

assessee has concealed the particulars of income. It is

interesting to note here also that the assessee despite making

surrender during the course of survey has deliberately

retracted from his commitment and did not show the

surrendered amount in the return of income filed. Therefore,

it is a clear case of deliberately concealing the particulars of

income which were surrendered during the course of survey.

We, therefore, do not find any infirmity in the orders of the

authorities below in levying and confirming the penalty under

section 271(1)(c) of the Act.

14.1 However, we find that the levy of penalty at 200% is

excessive in nature. The addition is ultimately confirmed

against the assessee. Therefore, levy of penalty at 200% is

excessive in nature. We, therefore, modify the orders of the

authorities below in levying penalty at 200% and reduce the

levy of penalty under section 271(1)(c) to 100%. The orders 9

of the authorities below to that extent are modified

accordingly and the Assessing Officer is directed to levy

penalty at 100% of the tax sought to be evaded.

15. In the result, the appeal filed by the assessee is

partly allowed as indicated above.

Order pronounced in the open court on this 19th day of

February, 2015.

Sd/- Sd/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 19 t h February, 2015

*Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarhha