SHRI GHANSHYAM DUNGARBHAI SUTARIYA,,SURAT vs. THE ACIT, CIRCLE-8,, SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER ITA No. 2971/AHD/2014 Assessment Year: 2009-10 Ghanshyam Dungarbhai Sutaria, VS. ACIT, Circle-8, H.No. 1, 1st floor, Sahaj Park Row Surat House, Hira Baug Circle, Vallabhacharya Road, Near Kailashdham Society, Ashwanikumar Road, Surat-395008 (PAN: AKKPP9318E) (Appellant) (Respondent)

Assessee by Sh. J.P. Shah, Sr. Advocate & Sh. Manish J. Shah, A.R. Department by Sh. Prasenjeet Singh, CIT(DR) ORDER PER H.S. SIDHU, JM This appeal is filed by the assessee against the impugned order dated 12.09.2014 passed by the Ld. CIT(A)-V, Surat pertaining to assessment year 2009-10 on the following grounds:- i) On the facts and circumstances of the case and as per law, the Ld. CIT(A) erred in levying penalty u/s. 271(1)(c) when the assessee had not violated provisions of section 271(1)(c) of the Act. ii) The assessee, therefore, submits that the penalty levied may be deleted. iii) The assessee craves leave to add, alter or vary any of the grounds of appeal. 1

admitted the transactions to be undisclosed. Therefore, Ld. CIT(A) satisfied that this is a fit case for levy of penalty u/s. 271(1)(c) of the Act for concealment of income and accordingly proposed to levy a minimum penalty of 100% tax sought to be evaded at Rs. 18,63,910/- (Rs.5,41,533 + Rs.13,22,380) u/s. 271(1)(c) of the Act vide his order dated 12.09.2014. Against the impugned penalty order dated 12.9.2014 of the Ld. CIT(A), assessee is in appeal before the Tribunal. 3. During the hearing, Ld. Sr. Counsel for the assessee has submitted that Ld. CIT(A) has erred in levying penalty u/s. 271(1)(c) when the assessee had not violated provisions of section 271(1)(c) of the Act. He further submitted that during the appellate proceedings the addition was made on enhancement u/s. 251(1) of the Act for the benefit of telescoping of income/outgoings. He further stated that the undisclosed transactions have been admitted to be undisclosed and he was ready to pay tax on it. It was further submitted that assessee had agreed to the addition in order to avoid litigation and buy peace of mind and paid tax thereon. In view of above, he requested that the penalty in dispute may be deleted. In support of his contention, he relied upon the following case laws:- i) Hon’ble Gujarat High Court decision dated 12.7.2001 in the case of Glass Lines Equipments Co. Ltd. Vs. CIT (2002) 253 ITR 454 (Guj.) ii) Hon’ble Gujarat High Court decision dated 17.10.1978 in the case of CIT vs. Vinaychand Harilal (1979) 120 ITR 752 (Guj.) iii) Hon’ble Gujarat High Court decision dated 09.10.2000 in the case of National Textiles vs. CIT (2001) 249 ITR 125 (Guj.) iv) ITAT, Ahmedabad ’A’ Bench Decision dated 30.11.2011 decided in ITA No. 2155/Adh/2010 (AY 94-95) in the case of ACIT vs. Manish Organics India Ltd. v) ITAT, Ahmedabad ’B’ Bench Decision dated 05.06.2015 decided in ITA No. 3348/Ahd/2010 (AY 2007-08) & ITA No. 1170/Ahd/2014 (AY 2007-08) in the case of M/s Ruchi Developers vs. ITO.

Surat in which the total credit entries was of Rs. 2.71 crores. This account was not disclosed by the assessee during the assessment proceedings nor appellate proceedings. From the bank details, it was found that the amount of Rs.1,90,00,000/- had been received from M/s Shradha Developers on the account of sale of land. An amount of Rs. 56,60,000/- has been transferred from the bank account no. SB 37906 in Surat People Co or Rank in the name of Smt. Ramuben (mother of the assessee). The assessee's mother is assessed to income tax and has filed the tax returns and the bank account has been reflected in a return of income. The bank statement of Smt. Ramuben reflected the transactions. The assessee claimed that similarly an amount of Rs. 14,85,000/- has been transferred from the bank account of Rasilaben (assessee's wife). It was contended that assessee's wife Rasilaben is assessed to income tax and has filed the tax bank account has been reflected in her return of income. The assessee was unable to furnish the copy of the bank statement of his wife to substantiate his claim. He only filed an acknowledgement of her tax return for AY 2009-10 showing income of Rs. 2,06,000/- only. No other details such as balance sheet, bank statement etc were filed to substantiate his claim. In absence of any evidence, the amount of Rs. 14,85,000/- claimed to have been received from his wife Rasilaben, was considered as from undisclosed sources and was added to the income of the assessee. In addition to this amount there is a cash deposit of Rs. 24,05,500/- for which the assessee has given no explanation. Since no explanation regarding the cash deposit of Rs. 38,90,500/- disclosed income. The assessee had made a submission during the appellate proceedings regarding the addition made on enhancement u/s 251(1) of the Act for the benefit of telescoping of income/outgoings. The benefit of the telescoping was not given to the assessee as the assessee had not, filed any return of income. No balance sheet had been filed by the assessee to show the assets and liabilities. The income from the various

sources earned by the assessee i.e., income from contract, interest income, income from commission and brokerage, Income from sale of land etc. had not been disclosed by the assessee. The sale of the property to M/s.Shradha Developers and transactions in the bank account had not been disclosed by the assessee. He is not maintaining any books of accounts which are supported by proper documents/evidences. The undisclosed incomes from the various sources have been detected by the department on the basis of the survey conducted and the documents impounded. Even during the assessment proceedings also the assessee had not produced the books of accounts or any evidence regarding the various sources of income. The benefit of the telescoping can only be given in the case where the assessee is able to discharge the burden of proof regarding the sources of income and its application. The transactions by the assessee have been made in cash. The onus is on the assessee to show that the income earned from the various sources have been utilized towards the outgoings in form of expenses, investments etc. A nexus has to be established between the incomings and outgoings. In the instant case, the assessee had failed to prove that the income from the various sources have been utilized towards expenses, investments, assets etc. In absence of primary details such as balance sheet, details of assets and liabilities, fund flow statements, etc., it is not known that assessee has made investments in which assets and what are his liabilities. The situation would have been different if the assessee had filed his return of income along with the details of assets and liabilities, fund flow statements, etc. The assessee was not forthcoming with correct and true income which is evident for the conduct of the assessee during the survey proceedings as well as assessment proceedings. Even during the appellate proceedings. The details pertaining to undisclosed sale of land and secret bank account were not disclosed by the assessee but was admitted when he was confronted with the facts and agreed to pay tax. The

assessee had contended that the undisclosed transactions have been admitted to be undisclosed and he was ready to pay tax on it. But the admission of the assessee was not on voluntary basis but only when he was confronted with the evidences, he admitted / surrendered. It is noted that The Andhra Pradesh High Court in the case of K.S.N. Mur thy v. Chairman, CBDT [2001] ITR 252 ITR 269 (AP), has held that 'voluntary' means without compulsion; it has to be understood as anything done intentionally and without coercion, compulsion or constraints. Where, assessee is not 'voluntary', it should be satisfied on the basis of the materials on record. Mere fear on the part of the assessee without anything more, cannot be a ground for not exercising the discretion. Such fear must be traceable to imminent or proximate exposure of the assessee to penal action, but for the filing of the return. 5.1 We note that the Hon’ble Allahabad High Court in the case of Bhairav Lal Verma v. Union of (India [1998] 230 ITR 855 while interpreting the word 'voluntarily' given in section 273(A) of the Act held that voluntarily means out of free will without any compulsion, When the assessee concealed the incriminating material with regard to income so disclosed cannot be held to be voluntarily. The Court held "The position thus settled is that the word "voluntarily" in section 273A of the Act means out of free will without any compulsion, Disclosure of concealed income after the Department has seized the incriminating material with regard to the income so disclosed cannot be voluntary disclosure, because It was made under the constraint of exposure to adverse action by the Department, But it cannot be held as a principle of law that the disclosure of Income made after the search/raid cannot be voluntary. It is a question which has to be decided by the Department in each case on the basis of the material on the record If Of') record there is incriminating material with regard to the disclosed income, the disclosure cannot be voluntary.” The assessee has contended that the he had agreed to

the addition in order to avoid litigation and buy peace of mind and paid tax thereon. It has been held in various judicial pronouncements that simply because assessee agreed to the addition of concealed income after detection thereof, the assessee cannot escape penalty u/s. 271(1)© of the Act. The Supreme Court held that voluntary disclosure does not lead to assessee being free from mischief of penal proceedings under section 271(1)© in MAK DATA P Ltd. Vs. CIT (2013) 38 taxmann.com(448). The Apex Court held that Explanation to section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer, between reported and assessed income. The burden then shift on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the Explanation, has been discharged by assesse, the onus shifts on the revenue to show that the amount in question constituted the income and not otherwise. The Assessing Officer shall not be carried away by the plea of the assessee like ‘voluntary disclosure’, ‘buy peace’, ‘avoid litigation’, ‘amicable settlement’, etc., to explain its conduct. It is noted that Assesse had only stated that he had surrendered the additional sum 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. Statue does not recognize those types of defences under the Explanation 1 to section 271(1)©. It is trite law that the voluntary disclosure does not free the assessee from the mischief of penal proceedings under section 271(1)©. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he has to be absolved from penalty. The surrender of income in this case was not voluntary in the sense that the offer of surrender was made in view of detection made by the e Assessing Officer. It has been held in various judicial pronouncements that simply because assessee agreed to the addition of concealed income after detection thereof and filed return in response to notice u/s. 148 of IT Act,

1961 offering additional income, assessee cannot escape penalty u/s 271(1)(c) of the Act. The relevant case laws are as following:

> PC Joseph & Bros (Kerala) 240 ITR 818 > Rakesh Suri (All) 331 ITR 458 > Sushma Devi Agarwal (ITAT-Kol-TM) 67 DTR 430

5.2 Also Where the omission is deliberate, he cannot get rid of merely by filing a revised return. The revised return being filed only after the Department got information which was confronted to the assessee, penalty is attracted. Similar view has been upheld by several courts in the following judgments:- > Dayabhai Girdharbai Vs CIT (80m) 32 ITR 677 > CIT Vs Haji P. Mohammed (Ker) 132 ITR 623 > Mahavir Metal Works Vs CIT (P&H) ~ > Badri Prasad Om Prakash Vs CIT (Raj) 163 ITR 440 > S.R. Arulprakasam Vs Prema Malini Vasan, ITO (Mad) 163 ITR 487 > F.C. Agarwal Vs CIT (Gauhati) 102 ITR 408 > CIT Vs J.K.A. Subramania Chettiar (Mad) 110 ITR 602 > Ravi & Co. Vs ACIT (Mad) 271 ITR 286 5.3 It is an obligatory duty cast upon income derived from any source under various heads and indicate the income under each head, which is chargeable to income-tax, after making the permissible deductions. Disclosure of income would be disclosure of particulars of income, which a person is duty bound to disclose in fulfillment of his statutory obligations to pay tax on the income chargeable to tax. After the return is filed under section 139(1) of the Act, the assessment of tax is to be made and for the purpose of making an assessment under the Act, the ITO makes an enquiry contemplated by section 142, under which notice is issued on the person who has made the return to produce accounts, documents or furnish verified information in writing including statement of all assets, etc. However, where the AO is satisfied that the return IS correct and complete, as were the

wordings of section 143(1) at the relevant time, he has to assess the total Income without requiring the presence of the assessee or production by him of any evidence that the return is correct and complete, as laid down in section 143(1). Where, however, the AO is not satisfied out the presence of the assessee or production of evidence that the return is correct and complete, he is required to issue notice enabling the assessee to produce evidence on which he may rely in support of the return. The 'total income' in such cases of regular assessment is, assessed after hearing the evidence adduced and considering all material gathered by the AO as provided in section 143(3). It therefore, follows that in the assessment proceedings under section 143, the AO can find out whether the return of income is correct and complete. If he holds that the return of income is not correct or that it is not complete in respect of the particulars of income which are required to be stated in the return, he will reach the correct figure of total income and determine the sum payable by the assessee or refundable on the basis of such assessment. If the income chargeable to tax has escaped assessment for any assessment year, by reason of omission or failure of the assessee to disclose fully and truly all material facts necessary for his assessment, reassessment proceeding can be initiated as provided under section 147. This again shows that full and true disclosure of income is a primary obligation of the assesee. It is clear that the proceedings can be initiated under section 271(1) only if the AO is satisfied in the course of any proceedings under that any person has concealed the particulars of his income or has furnished inaccurate particulars of such income. The expression used in clause © is ‘has concealed the particulars of his income’ or ‘furnished inaccurate particulars of such income’. Therefore, both in cases of concealment and inaccuracy, the phrase 'particulars income' is used. It will be noted that as regards concealment, the expression in clause (c) is ‘has concealed the particulars of his income’ and not ‘has concealed

this income’. It is obvious that the penal provisions would operate when there is a failure of duty to disclose fully and truly particulars of income, imposed under the Act and the Rules there under. The duty is enjoined upon a person to make a correct and complete disclosure of his income and it is only when he fails in his duty by not disclosing his income or part thereof, he conceals the particulars of his income. The duty is enjoined upon him to make a complete disclosure of his income as well as correct disclosure. Therefore, if the disclosure made of the particulars of income is incorrect, then also he commits breach of his duty. Such defaults entail the penal consequences contemplated by section 271(1)©. The assessee was not forthcoming in the declaration of the true and correct income. The provisions of Sec. 271(1)(c) also includes deemed income. The position of law with regard to levy of penalty u/s 271(1)© has undergone a substantial change after the insertion of Explanation (1) to Section 271(1)© w.e.f. 1.4.1976. Explanation (1) to section 271(1)(c) raises a presumption that as and when any amount is added or disallowed in computing the total income the same shall be deemed or represent the income in respect of which particulars have been concealed. Similar view has been expressed in the case of A.M. Shah & Co. Vs CIT (Guj) 238 ITR 415. The question of ‘onus’ is of primary and added importance in legal acrimony. This was the position before the amendment was introduced in 1976. ‘Mens rea’ was an important ingredient for the imposition of penalty. The position of law on or after 1.4.1976, is that where, in respect of any item of credit, a) the assessee fails to offer an explanation, or b) the assessee offers an explanation which the AO considers to be false, or c) the assessee offers an explanation but no material or evidence to substantiate it, he shall be deemed to have concealed such income within the meaning of section 271(1)(c). What sections 68, 69, 69B and 69C deem for the purpose of assessment was injected for the purpose of penalty by

operation of a deemed provision. A proviso was added to new Explanation. It concerns cases where the assessee offers an explanation which he is not able to substantiate. Consequentially, the provision is intended to save such amount from imposition of penalty, although the same had been added to the assessee's income in the assessment, if the assessee's explanation is found to be bona fide and all facts relating to the same and material to the computation of his total income have been disclosed by him. 5.4 It is noted that Section 271(1)© is attracted where, in the course of any proceedings under the Act, the Assessing Officer or the first appellate authority is satisfied that : (a) any person has concealed particulars of his income, or (b) has furnished inaccurate particulars of such income. The expressions 'has concealed' and 'has furnished Inaccurate particulars' have been defined either in the section or elsewhere in the Act. However, notwithstanding differences in the two circumstances, they lead to the same effect. viz.. keeping off a certain portion of income. The former is direct while the latter may be indirect in its execution. The word ‘conceal' is derived from Latin word 'concelare which implies ‘to hide’. In webster's New International Dictionary, the word has been equated 'to hide or withdraw from observation; to cover or keep from side; to prevent discovery of; to withhold knowledge of. There may be cases where the facts may attract both the offences, and in some cases there may be overlapping of the two offences. The expression of the principle that mere rejection of the explanation is not sufficient to sustain penalty is not backed up by necessary enquiry as per rule of evidence, there is distinction between set of facts "not proved" and 'facts disproved' and 'facts proved'. Benefit of the principle that mere non-satisfactory nature of explanation furnished cannot amount to proof of falsity of explanation furnished can apply in case the fact-finding authority reaches to a stage where it can only that the fact alleged is "not proved" which would that except rejection of the explanation furnished by

the assessee, there is no material to sustain in the plea of concealment. But, on the other hand, if the state of affairs reveals a stage where one can positively reach a conclusion that the fact alleged is proved or disproved, the principle that mere rejection of explanation cannot result in levy of penalty will have no application. To reach this stage also, inquiry will have to be undertaken of the disclosure made in the return or in the statement annexed to the return and to arrive at a finding whether the particulars disclosed are truthful, or false or not proved to be satisfactory. In the first case, it be a positive case of no concealment in the second stage, it would be a positive case of concealment and in the third case, benefit of doubt will go in favour of the assessee. But in case, inquiry must proceed from the stage the alleged disclosure has taken place and not at that stage and close the inquiry at the threshold on the abstract principle that mere on of explanation does not result into levy of penalty. In the instant case, it is case of ‘facts proved' as the transactions regarding the sale of property and bank entries have not been disclosed as not return of income has been filed nor recorded in the books of accounts. Similar as been expressed in the case of Vidvaqauri Natwarlal, 238 ITR 91 (Guj). Similar view has also been expressed in the following cases of jurisdictional High Court:-

- Kantilal Manilal v. CIT [1981] 130 ITR 411 (Guj ): - CIT v. Suleman Abdul Sattar [1983] 139 ITR 8 (Guj); - CIT v. Namlabhai Bhanabhai [1987] 165 WR 189 (Guj); - CIT v. Vilasben Hasmukhlal Shah (Smt.) [1991] 192 ITR 214 (Guj); - CIT v. Abdulgafur Ahmed Wagmar.[1993] 199 ITR 827 (Guj). 5.5 A conspectus of the Explanation added by the Finance Act 1964 and the subsequent substituted Explanations makes it clear that the statute visualized the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the explanation (both after 1964 and 1976) is a rule of evidence. Presumptions which are rebuttable in nature are available to be drawn. The initial burden of 13

discharging the onus of rebuttal is on the assessee. The rationale behind this view is that the basic facts are within the special knowledge of the assessee. Section 106 of the Indian Evidence Act, 1872 gives statutory recognition to this universally accepted rule of evidence. There is no discretion conferred on the Assessinq Officer as to whether he can invoke the Explanation or not. Explanation 1, which primarily concerns the case at hand, automatically comes into operation when, in respect of any facts material to the computation of total income of any person, there is failure to offer an explanation or an explanation is offered which is found to be false by the Assessing Officer or First appellate authority, or an explanation is offered which is not substantiated. In such a case, the amount added or disallowed in computing the total income is deemed to represent the income in respect of which particulars have been concealed. As per the provision of Explanation 1, the onus to establish that the explanation offered was bona fide and all facts relating to the same and material to the computation of his income have been disclosed by him will be on the person charged with concealment. The provision of Explanation 1 is concerned only with cases coming under clause (B) of the Explanation, Where the assessee offered an explanation which he was not able to substantiate. The explanation of the assessee for the purpose of avoidance of penalty must be an acceptable explanation; it should not be a fantastic or fanciful one. 5.6 The position on and after 1-4-1976 is clear that where, in respect of any item of credit, the assessee has offered an explanation which the taxing officer has considered to be false or the asssessee has offered an explanation but no material or evidence to substantiate it, he shall be deemed to have concealed such income within the meaning of section 271(1)©. The intention to hide the actual state of affairs is clear. In the aforesaid background the Assessing Officer is not obliged to intimate the assessee that Explanation 1 to section 271(1)© is proposed to be applied.

Scheme of the provision does not provide for such a requirement either directly or inferentially. The provision raises only a rebuttable presumption which the assessee is required rebut by placing on record materials. Further w.e.f. 10.09.1986, amendment has been made Explanation 1-B to section 271(1)(c). After this amendment, further onus has been placed on the assessee to prove that the explanation furnished by him was bonafide. The position now is that unless and until the assessee substantiates the explanation and proves that such an explanation was bonafide, the addition made to his income shall deemed to represent the concealed income. As per the proviso to this Explanation, the onus to establish that the explanation offered was bonafide facts relating to the same and material to the computation of his income have been disclosed by him will be on the person charged for concealment. Now the entire onus is on the assessee to not only offer an explanation but also to substantiate it and to prove that the presumption was bonafide. 5.7 We further find that Hon'ble Supreme Court in the case of Union of India v. Dharmendra Textile Processors (2008) 306 ITR 277 has held that the Explanations added to section 271(1)(c) in entirety also indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing returns. In another case in CIT v. Atul Mohan Bindal [2009] 9 SCC 589 their Lordship held that mens rea is not necessary for Imposing penalty under section 271(1)© of the Act since it is a civil liability. It has further been held that if the Assessing Officer satisfied that the person has concealed the particulars of his income or furnished inaccurate particulars of income, such person may be directed to pay penalty. 5.8 Keeping in view of the facts and circumstances of the case and the case laws discussed hereinabove, we find that Ld. CIT(A) has rightly observed that assessee had deliberately and intentionally not disclosed the

true and correct income with the intention to evade tax to the extent of Rs. 2,28,90,500/- on account of undisclosed sale of property and bank transaction and the Assessee himself has not filed any return of income and has admitted the transaction to be undisclosed. Even otherwise, we note that the Tribunal in quantum appeal vide its order dated 06.6.2019 in assessee’s own case in the same assessment year i.e. 2009-10 in ITA No. 1615/Ahd/2014 has upheld the action of the Ld. CIT(A) for enhancement of income of Rs. 38,90,500/-. In view of above, we do not find any infirmity in the impugned penalty order of the Ld. CIT(A), hence, we uphold the penalty order of the Ld. CIT(A) and reject the ground raised by the Assessee. The judicial decisions relied upon by the Ld. Sr. Counsel for the Assessee have been duly considered. In our considered view, we do not find any parity in the facts of the decisions relied upon with the peculiar facts of the case in hand. 6. In the result, the appeal of the Assessee is dismissed. Order pronounced on 14-08-2019. Sd/- Sd/- (O.P. MEENA) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 14/08/2019 “SRB” Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, Surat / / TRUE COPY / / 16