Ms. Devinder Kaur, Mohali vs Assessee

PER BHAVNESH SAINI,JM

This appeal by assessee is directed against the order of ld.

CIT(Appeals) Chandigarh dated 13.08.2014 for assessment year

2010-11, challenging the levy of penalty under section 271(1)(c)

of the Income Tax Act.

2. The brief facts of the case are that a survey u/s 133A of

the Act was conducted at the business premises of M/s Orbit

Apartment West (P) Ltd on 1 s t & 2 n d December, 2011. The

appellant is a director in this company. During the course of

survey, certain incriminating documents, showing the actual

sale consideration for transfer of land by the appellant were

found and when confronted with these documents, the appellant 2

agreed to pay tax on capital gains as per the sale consideration

shown in the agreement with the company.

3. In the original return of income, long term capital gain was

declared at Rs. 4,76,42,000/-. After the aforesaid survey, the

appellant filed a revised return of Income on 07.02.2011 and an

amount of Rs. 5,41,42,000/- was shown in this return by way of

capital gain. The income returned in the revised return was

accepted by the Assessing Officer and penalty proceedings u/s

271(l)(c) of the Act were initiated. The appellant filed a reply in

the penalty proceedings, but the Assessing Officer was not

satisfied with the explanation of the appellant on the ground

that the additional income disclosed of Rs. 65,00,000/- was as a

result of survey action. The Assessing Officer imposed minimum

leviable penalty of Rs. 20,08,500/- on the additional income

disclosed by the appellant.

4. The assessee challenged the levy of penalty before ld.

CIT(Appeals) and filed written submissions which was

considered on merits and the ld. CIT(Appeals), after considering

the facts and material on record, confirmed the levy of penalty.

His findings in para 5 to 6 of the appellate order are reproduced

as under :

"I have considered the f acts of the case. As per the provisions of section 271(l)(c), penalty can be levied, if the assessee has concealed particulars of his income or furnished inaccurate particulars of such income. For the sake of ready ref erence, Expl anation-1 belo w section 271(1) is reproduced belo w:

"Explanation 1.-Where in respect of any f acts material to the computation of the total income of any person under this Act,-

3 (A) such person f ails to offer an explanation or offers an explanation which is found by the Assessing Off icer or the Commissioner (Appeals) or the Commissioner to be f alse, or

(B) such person offers an explanation which he is not able to substantiate and f ails to prove that such expl anation is bonaf ide and that all the f acts 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 conceal ed."

5.1 Thus, when the assessee has concealed particulars of his income or f urnished inaccurate particulars, conditions laid down in Explanation-1 (supra) have to be examined. In the instant case, the appell ant had decl ared long term capital gain of Rs. 4,76,42,000/- in the original return of income. Survey u/s 133A of the Act was carried out on 1 s t & 2 n d December, 2011 at the business premises of M/s Orbit Apartment West (P) Ltd, in which the appellant was a Director. During the course of survey, the appellant had surrendered Rs. 65,00,000/-. The appellant had surrendered Rs. 65,00,000/- on account of capital gain and agreed to pay tax because of survey operation af ter which the case was selected f or scrutiny, meaning thereby that if there was no survey, the appell ant would have concealed income of Rs. 65,00,000/-. The case of the appellant is squarely covered by the judgement of Hon'ble Delhi High Court in the case of M/s Zoom Communication (P) Ltd. (327 ITR

510), in which it was held:

"It is true that mere submitting a claim which is incorrect in l aw would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the cl aim made by the assessee needs to be bona_ f ide. If the claim besides being incorrect in law is mal a- f ide, Explanation 1 to section 271 (1) would come into pl ay and work to the disadvantage of the assessee.

The Court cannot overlook the f act that only a small percentage of the Income-tax Returns are picked up f or scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the expl anation f amished by him f or making such a claim is not found to be bonaf ide, it would be diff icult to say that he would still not be liable to penal ty-under section 271(l)(c) of the Act. If we take the vie w 4

that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be l iable to imposition of penal ty, even if he was not acting bona f ide while making a claim of this nature, that would give a licence to unscrupulous assessees to make wholly untenable and unsustainable cl aims without there being any basis f or making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self -assessment under section 143(1) of the Act and even if their case is selected f or scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a mal a f ide intention to evade tax other wise payable by them would get away without paying the tax legally payable by them if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penal ty provisions in the Act have."

5.2 From the f acts of the case as discussed hereinabove, it is evident that the appell ant had sho wn incorrect income in the original return with clear and deliberate intention to evade tax. In f act, the appellant had taken a calculated risk, but was caught on the wrong f oot because of the survey operation in the case of the company, in which the appellate was a director. The Ld. Counsel has also argued that certain additional income was decl ared in the preceding year i.e. A.Y. 2009-10 also, but penal ty proceedings f or conceal ment were not initiated. This argument of the Ld. Counsel is not acceptable. Each assessment is a separate proceeding and the principle of res-judicata does not apply to the Income T ax proceedings. Moreover, if an Assessing Off icer decided not to initiate penal ty proceedings u/s 271(l)(c) in a particular year on an issue, it does not mean that the assessee gets immunity f rom such proceedings in subsequent years. Be as it may, the penal ty f or conceal ment levied in this year is conf irmed. Grounds of appeal taken by the appellant are dismiss.

6. In the result, the appeal is dismissed."

5. The ld. counsel for the assessee reiterated the submissions

made before authorities below and submitted that assessee paid

tax on the returned income as per revised return on capital

gains. The assessee was having a bonafide belief that whenever

the balance amount was to be received, would be shown as 5

capital gains and as such it was a debatable issue and levy of

the penalty is not justified.

6. On the other hand, ld. DR relied upon orders of the

authorities below and referred to the surrender letter filed on

behalf of the assessee as noted in the penalty order and

submitted that the same would disbelieve the claim of the

assessee. The ld. DR also submitted that there is no voluntary

surrender concept applicable in view of the decision of the

Hon'ble Supreme Court in the case of Mac Data 358 ITR 593.

7. We have considered the rival submissions and material

available on record. The facts noted above are not in dispute

that the assessee filed original return of income on 23.07.2010

declaring less capital gains. It is also not in dispute that

subsequently, survey under section 133A of the Act was

conducted at the premises of M/s Orbit Apartment West Pvt.

Ltd. on 1 s t & 2 n d November, 2011 i.e. after filing of the original

return of income. The assessee is Director in this company.

During the course of survey, certain incriminating documents

showing the actual sale consideration for transfer of land by

assessee were found and when confronted with these documents,

assessee agreed to pay tax on capital gains as per the sale

consideration shown in the agreement with the company. It is

also not in dispute that the assessee, later on filed revised

return on 07.02.2011 declaring higher capital gains in the

revised return on which tax was also paid. The Assessing Officer

has reproduced the relevant extract of the surrender letter filed

on behalf of the assessee in the penalty order in which the

assessee has clearly admitted certain discrepancies pointed out 6

in the books by the survey party and assessee agreed that he

has paid less tax on capital gains as per the books of the

company. The assessee, therefore, agreed to pay the proper tax

on the capital gains earned by him. It would, therefore, clearly

reveal that despite the assessee was having documents in his

power and possession but declared lesser income on account of

capital gains in the original return of income and it was only

when survey was conducted and certain incriminating

documents were found against the assessee, assessee agreed to

show proper income on account of capital gains and later on,

filed the revised return showing the proper capital gains in the

revised return. It is, therefore, clear that assessee has

concealed his particulars of income under the head 'capital

gains' in the original return of income. The Hon'ble Bombay

High Court in the case of Jyoti Laxman Konkar Vs CIT 292 I TR

163 held as under :

The assessee had filed a return for the 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(l)(c) and this was upheld by the Tribunal. On appeal to the High Court:

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 view to avoid the payment of tax, the imposition of penalty was valid.

8. The Hon'ble Gujrat High Court in the case of LMP Precision

Engg. Co. Ltd. Vs DCI T (Assessment) 330 I TR 93 confirmed the 7

penalty for filing revised return after survey operation would

show concealment of income. It was held as under :

Held, that it was only af ter the statement of the chairman and managing director was recorded by the Deputy Director of Income-tax (Investigation), Mumbai, that the f irst disclosure dated October 20,1988, Rs. 54,71,463 was made accompanied by another disclosure of Rs. 54 lakhs in a round f igure being divided into three segments of Rs. 18 l akhs each for assessment years 1986-87, 1987-88 and 1988-89. The revised return decl aring a sum of Rs. 78,56,613 came about as a consequence of follo w-up proceedings undertaken by the Deputy Director of Income-tax in relation to the other three suppliers, viz., SC, NB and NPST. Theref ore, the assessee could not be stated to have voluntarily come forward to disclose income which had unintentionally been omitted f rom the original return of income. The imposition of penal ty was valid."

9. Considering the facts of the case in the light of the above

decisions, it is clear that whatever arguments have been raised

by ld. counsel for the assessee, are irrelevant to the matter in

issue because no debate is permissible and even the assessee

has not made out any debatable issue while making a surrender

at the time of survey. It is a clear case of concealment of

income, therefore, the claim of assessee could not be said to be

bonafide. Merely because assessee has paid taxes on the correct

capital gains declared in the revised return would not absolve

the assessee from levy of the penalty. The concept of voluntary

surrender is no more applicable as is held by Hon'ble Supreme

Court in the case of Mac Data (supra). The ld. CI T(Appeals) was,

therefore, justified in holding that Explanation-I to Section

271(1)(c) of the Act is clearly attracted in the case of the

assessee.

10. Considering the totality of the facts and circumstances , it

is clear that during the course of survey, the incriminating 8

documents were found to show that assessee has concealed the

particulars of income on account of capital gains, therefore,

authorities below were justified in levy of the penalty under

section 271(1)(c) of the Act. We do not find any merit in the

appeal of the assessee. The same is accordingly dismissed.

11. In the result, appeal of the assessee is dismissed.

Order pronounced in the Open Court on 12 t h January,2015.

Sd/- Sd/-

(T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 12 t h January,2015. 'Poonam' Copy to:

The Appellant, The Respondent, The CIT(A), The CIT,DR

Assistant Registrar, ITA T Chandigarh