Setu Developers, , Ahmedabad vs Assessee

Setu Developers, Vs Dy. CIT, Cen. Circle 2(1), Copper Stone 3rd Floor, Aaykar Bhaavan Next to Shridhar Bunglows, Ashram Road, Thaltej Shilaj Road, Thaltej, Ahmedabad-380015. Ahmedabad-380059 (Appellant) (Respondent) PA No.ABSFS 1780Q

Appellant by Shri P. M. Mehta with G.M. Thakor, AR Respondent by Shri Subhas Bains, CIT-DR

Date of hearing: 7.5.2015 Date of pronouncement: 11.5.2015

ORDER

PER Shri N. S. Saini, Accountant Member.

This is an appeal filed by the assessee against the order of

CIT(A) XII, Ahmedabad, dated 9.1.2015. The sole ground of appeal

taken is that the CIT(A) erred in upholding the levy of penalty under

section 271(1)(c) of the I.T. Act, of Rs.2,41,02,000/- made by the AO. ITA No.380/Ahd/2015

2. The brief facts of the case are that a search action was carried

out u/s 132 of Income-tax Act, 1961 on 6.1.2011 in the case of

Savalia Group, residential premise of Shri Maganbhai H. Bhakhar

situated 86/1, H. Colony, Nehrunagar Char Rasta, Ambawadi. In the

statement recorded on 6.1.2011 & 7.1.2011 under section 132(4) of

the Act, Shri Maganbhai H. Bhakhar admitted an amount of

Rs.7,80,00,000/- as undisclosed income. The disclosure in the hands

of assessee firm was made in relation to ''on money'' received from

various parties for development of projects of ''Copper Stone'' near

Shridhar Bunglow, Thaltej. The scheme contained 108 flats and

assessee had disclosed Rs.7.80 crores as ''on money''from 108

members. The same was disclosed by the assessee in the return of

income and was assessed to tax by the AO vide order passed under

section 143(3) on 22.01.2013.

3. During the course of assessment proceedings the assessee

was required to provide the details of ''on money'' received from each

member for booking 108 flats. The assessee failed to provide this

information and, therefore, penalty proceedings were initiated under

section 271(1)(c) of the Act for submitting inaccurate particulars of

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income. In the penalty order the AO observed that the core issue in

the case of the assessee was what constitutes concealment of

particulars of income or furnishing inaccurate particulars of such

income. The legal issue involved here is whether particulars of

income can be said to have been concealed even if quantum of

returned income is same as assessed income. The AO observed that

the assessee firm was found to have concealed the particulars of

income declared in the return of income by not providing true and

correct facts. He observed that it is clear from the facts of the

assessee's case that the assessee has neither furnished nor

explained the manner in which undisclosed income is earned and did

not provide the Department with true and correct particulars of

income and, therefore, he was satisfied that the assessee has

concealed particulars of its income and furnished inaccurate

particulars of its income and was liable for penalty u/s 271(1)(c) of the

Act and accordingly he levied penalty of Rs.2,41,02,000/- being 100%

of the tax evaded.

4. On appeal the CIT(A) confirmed the action of the AO by

observing that it was the duty of the assessee to record all his

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transaction, investment, expenditure and income in the books of

account along with source of payments and receipt and to declare its

true income in the return of income filed in every year.

5. There are ample judicial pronouncements wherein it has been

held that even surrendering of income or filing of revised return does

not absolve the assessee from the applicability of penalty

proceedings u/s 271(1)(c). Since the assessee did not record the

unaccounted on money received in the books of accounts, the

assessee failed to show true and correct income in the books of

account maintained. The CIT(A) also observed that the AO levied the

penalty under sub-clause (c) of explanation 4 to section 271(1)(c) of

the Act which provides that expression of amount of tax sought to be

evaded means the difference between the tax on the total income

assessed and the tax that would have been chargeable had such

total income been reduced by the amount of income in respect of

which particulars have been concealed or inaccurate particulars have

been furnished. He, therefore, held that the AO was fully justified in

levying penalty under clause (c) of explanation 4 of section 271(1)(c)

of the Act.

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6. Before us the ld. AR of the assessee submitted that during

the course of search the assessee made disclosure of Rs.7.80 cores

on 6.1.2011 and 7.1.2011 and in the return filed for AY 2001-12 on

30.09.2011 the assessee disclosed the income and paid tax thereon.

The assessment was made by the AO at the very same income at

which the return was filed by the assessee i.e.7,81,17,510/- It was,

therefore, the submission that there was no concealment of income

by the assessee with respect to the return of income filed by the

assessee and hence was not liable to penalty. It was further

submitted that confirmation of the impugned penalty by the CIT(A)

under explanation 4 to section 271(1)(c) of the Act was totally illegal

for the simple reason that the aforesaid explanation 4 is only a

procedural or machinery provision the sole object of which is to

facilitate the calculation of the quantüm of penalty to be levied under

section 271(1)(c) of the Act. Explanation 4 is not a deeming provision

and levy of penalty under explanation 4 renders the appellate order

passed by the CIT(A) as bad in law.

7. He further relied on the decision of Hon'ble Delhi High Court

in the case of CIT vs.SAS Pharmaceuticals (2011) 335 ITR 259 (Del) 5 ITA No.380/Ahd/2015

wherein it has been held -''that clause (c) of section 271(1) of the

Act authorizes imposition of penalty when the Assessing Officer is

satisfied that the assessee had either concealed particulars of his

income or furnished inaccurate particulars of such income. It was not

a case of furnishing inaccurate particulars of income, as in the

Income-tax return, particulars of income had been duly furnished and

the surrendered amount was duly reflected in the return. The

question whether the particulars of income were concealed by the

assessee or not would depend upon whether this concealment had

reference to the return filed by the assessee. The words ''in the

course of any proceedings under this Act'' were prefaced by the

satisfaction of the Assessing Officer or the Commissioner (Appeals).

When the survey was conducted the question of satisfaction of the

Assessing Officer or the Commissioner (Appeals) or the

Commissioner did not arise. It was the Assessing Officer who initiated

the penalty proceedings and directed the payment of penalty. He had

not recorded any satisfaction during the course of survey. The

decision to initiate penalty proceedings was taken while making the

assessment order. Thus, the expression ''in the course of any

proceedings under this Act'' could not have the reference to servey

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proceedings, in this case. The concealment of particulars of income

or furnishing of inaccurate particulars of income by the assessee had

to be in the return filed by it. No penalty could be imposed unless the

conditions stipulated in the provisions were duly and unambiguously

satisfied. Since the assessee was exposed during the survey, may

be, it would have not disclosed the income but for the survey.

However, there could not be any penalty only on surmises,

conjectures and possibilities. Section 271(1)(c) of the Act had to be

construed strictly. Unless it was found that there was actually

concealment or non-disclosure of the particulars of income, penalty

could not be imposed. There was no such concealment or non-

disclosure as the assessee had made a complete disclosure in the

return and offered the surrendered amount for the purposes of tax."'

8. On the other hand, the ld. DR relied on the order of ld. CIT(A).

9. We have heard the rival submissions and perused the orders of

the lower authorities and materials available on record. In the instant

case the Assessing Officer levied penalty of Rs.2,41,02,000/- on the

ground of furnishing of inaccurate particulars of income in respect of

"on money'' of Rs.7.80 crores. The relevant factors are that a search 7 ITA No.380/Ahd/2015

and seizure operation was carried out in the case of the assessee on

6.1.2011 in the course of which the assessee disclosed earning of

''on money'' of Rs.7.80 crores.

10. Thereafter the assessee in the regular return filed by it

disclosed inter alia income of Rs.7.80 crores as received as on

money. The assessee disclosed its total income at Rs.7,81,17,501/-

in the return of income and was assessed under section 143(3) vide

order dated 22.01.2013 at the returned income of Rs.7,81,17,501/-.

Thus there was no difference in the returned income and assessed

income.

11. According to the Assessing Officer the assessee could not

furnish names of the persons from whom "on money'' was received

and therefore he considered the particulars of income of ''on money''

as inaccurate and therefore levied penalty under section 271(1)(c).

12. On appeal Commissioner of Income-tax (Appeals) confirmed

the above levy of penalty.

13. We find that in the instant case penalty has not been levied

under section 271 AAA of the Act but under section 271(1)(c) of the

Act.

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14. In our considered view no inaccuracy in the particulars of

income of Rs.7.80 crores being ''on money'' could be established by

the Assessing Officer by bringing on record any relevant material.

15. The amount of income and the nature of income as disclosed

by the assessee was accepted by the Assessing Officer on

assessment. Thus no inaccuracy or falsity in the particulars furnished

by the assessee was found by the Assessing Officer. The case of the

Assessing Officer is that further more details in respect of the income

which was desired by the Assessing Officer could not be furnished by

the assessee and therefore for this failure of the assessee he levied

penalty under section 271(1)(c) of the Act. In our considered view for

such a failure penalty under section 271(1)(c) cannot be levied.

Penalty under section 271(1)(c) can be levied only for either

concealment of income or for furnishing inaccurate particulars of

income. Therefore, the Commissioner of Income-tax (Appeals) was

not justified in confirming above levy of penalty.

16. Further explanation 4 to section 271(1)(c) explains the

procedure to calculate the quantum of tax sought to be evaded and

therefore, in a case where returned income and assessed income are

9 ITA No.380/Ahd/2015

same, no penalty under section 271(1)(c) can be levied with the help

of provisions of explanation 4 to section 271(1)(c) of the Act.

17. We find that the Hon'ble Gujarat High Court in Tax Appeal

No.1181 of 2010 with Tax Appeal No.1182 of 2010 to TaxAppeal

No.1183 of 2010 in the case of Kirit Dahyabhai Patel vs. Asstt.

Commissioner of Income-tax, vide order dated 03/12/2014 held as

under :-

"13. Considering the facts and circumstances of the case and also considering the decisions relief upon by learned senior advocate for the appellant, we are of the considered opinion that the view taken by the Tribunal is erroneous. The CIT(A) rightly held that it is not relevant whether any return of income was filed by the assessee prior to the date of search and whether any income was undisclosed in that return of income. In view of specific provision of Section 153A of the I.T. Act, the return of income filed in response to notice under Section 153(a) of the I.T. Act is to be considered as return filed under section 139 of the Act, as the Assessing Officer has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under section 271(1)(c) of the I.T. Act and the penalty is to be levied on the income assessed over and above the income returned under section 153A. if any.

We therefore, delete the penalty of Rs.2,41,02,000/- levied under

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

18. In the result, the appeal of the assessee is allowed.

Order pronounced in the open Court on 11/5/2015

Sd/ Sd/- (S. S. Godara) (N. S. Saini) Judicial Member Accountant Member

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