SURESH CHAND LAXMI CHAND vs. I.T.O.WARD-3, CHITTORGARH

This appeal preferred by the appellant under Section 260A of Income Tax Act, 1961 (for short “the Act”) is directed against order dated 25.7.14 of the Income Tax Appellate Tribunal (ITAT), Jodhpur Bench, Jodhpur, whereby an appeal preferred by the appellant against the order of Commissioner of Income Tax (Appeals) [CIT (A)] dated 28.5.12 pertaining to Assessment Year 2002-03, affirming the order of penalty dated 27.6.11 passed by the I.T.O. Ward III, Chittorgarh under Section 271 (1)(c) of the Act, stands dismissed.

The appellant was awarded a license for poppy straw for the Financial Year 2001-02 by the Department of Excise, Ratlam (M.P.). The appellant deposited a sum of Rs.1,16,05,000/- as license fee. The appellant did not file return of income. The Assessing Officer (A.O.) issued a notice under Section 148 of the Act to the appellant after recording the reasons. In response to (2 of 4) [ITA-1/2015] the notice, the assessee did not file any details and therefore, the A.O. proceeded to pass the assessment order under Section 144 of the Act assessing the income of assessee at Rs.1,27,65,500/-, which included undisclosed deposit of license fee of Rs.1,16,65,000/- and estimated profit of Rs.11,60,500/- earned from poppy straw contract. Aggrieved by the ex parte assessment order dated 27.3.06, the appellant preferred an appeal before CIT (A). The appeal was dismissed by the CIT (A) vide order dated 26.12.08 as barred by limitation. However, the appeal preferred by the appellant against the order dated 26.12.08 passed by the CIT (A) was allowed by the ITAT, Jodhpur Bench vide order dated 30.6.09 and the matter was remanded to the Assessing Officer for passing the assessment order afresh. After restoration of the case to the files of A.O., the appellant filed Return of Income for the Assessment Year 2002-03 showing a loss of Rs.4,18,889/-. While filing the return, the appellant submitted Computation of Income, Profit & Loss Account and Capital Account showing an opening balance of Rs.92,69,420/- and offered a sum of Rs.91,00,000/- as income without disclosing the source. Since the appellant failed to explain the claim of opening balance, the A.O. treated the amount of opening balance of Rs.92,69,420/- as its undisclosed income. Further addition of Rs.2,71,000/- was also made as assessee failed to prove the creditworthiness of Creditors. The A.O. also initiated penalty proceedings under Section 271 (1)(c) of the Act against the appellant for concealment of the income and furnishing of inaccurate particulars of income. In response to the notice, the appellant filed reply contending that no penalty can be levied inasmuch as, the appellant’s case does not fall within the ambit of provisions of Section 271 (1)(c) of the Act. The (3 of 4) [ITA-1/2015] explanation furnished by the appellant was not found plausible and acceptable by the A.O. and accordingly, vide order dated 27.6.11 a penalty of Rs.28,92,789/- was imposed upon the appellant.

Aggrieved by the penalty order dated 27.6.11, the appellant preferred an appeal which was dismissed by the CIT (A), Udaipur vide order 28.5. 12. Aggrieved thereby, the second appeal preferred by the appellant has been dismissed by the ITAT. Hence this appeal.

Learned counsel appearing for the appellant contended that it was not a case of concealment of the income inasmuch as, the appellant had not earlier filed the return and in response to the notice under Section 148, he has voluntarily offered income of Rs.91,00,000/- in the Profit & Loss Account stated to be out of opening capital. Learned counsel would submit that the appellant having made disclosure of the income voluntarily, the same cannot be treated to be a case of concealment of particulars of income or furnishing of inaccurate particulars of such income and thus, the provisions of Section 271(1)(c) of the Act are not attracted in the matter.

We have considered the submissions of the learned counsel for the appellant and perused the material on record.

Indisputably, the Assessing Officer detected the undisclosed income from the information of the Department of Excise, Ratlam. The appellant for the first time disclosed opening capital of Rs.92,69,427/- in the return of income filed, after setting aside of the best judgment assessment passed by the Assessing Officer after issuing notice under Section 144 of the Act. Admittedly, the appellant did not produce any evidence to prove the amount of (4 of 4) [ITA-1/2015] opening balance as disclosed in the return filed. Thus, provisions of Explanation 1 to Section 271(1)(c) is rightly held applicable to the present case by the learned ITAT.

Moreover, as laid down by the Hon’ble Supreme Court in ‘Make Data (P) Ltd. Vs. Commissioner of Income Tax-II’ 358 ITR 593, the law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved from penalty. In the instant case, the disclosure of the income by the appellant cannot be considered to be voluntary inasmuch as the disclosure was made in view of detection made by the Assessing Officer. Further, by virtue of Explanation 3 to Section 271(1)(c) of the Act, the appellant having failed to file the return within the specified period, which he was required to furnish in respect of taxable income for the relevant assessment year, notwithstanding that he has furnished a return of his income pursuant to notice under Section 148, for the purposes of clause (c) of sub-section (1) of Section 271, he will be deemed to have concealed the particulars of his income in respect of such assessment year.

Thus, viewed from any angle, the order impugned passed by the ITAT confirming the order passed by the CIT(A) upholding the order of penalty passed by the Assessing Officer does not suffer from any infirmity or illegality and thus, the present appeal does not involve any substantial question of law requiring consideration of this Court.

In the result, the appeal fails, it is hereby dismissed. (VIRENDRA KUMAR MATHUR),J (SANGEET LODHA),J vij