COMMISSIONER OF INCOME TAX vs. SHRI. WILSON WILFRED VALADARES

PDF · subscribers
TXA/53/2014HC BombayHCBM05001422201426 March 2015Author: HON'BLE SHRI JUSTICE M. S. SANKLECHA,F. M. REIS6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the questions framed did not give rise to any substantial question of law. The Court noted that both the CIT(A) and the Tribunal had accepted the assessee's explanation regarding the Rs. 49.79 lakhs being commission from a property sale to be shared with others. The Court found that the Revenue itself proceeded on the basis of a property sale, as evidenced by the reopening notice issued under Section 148, which was identical to the assessee's explanation. Therefore, there was no reason to disturb the concurrent findings of fact by the lower authorities. The Court reiterated that the inability to prove a liability does not automatically amount to furnishing inaccurate particulars or concealing income for the purpose of imposing penalty under Section 271(1)(c). Consequently, the penalty was rightly deleted.

What were the facts?

The Revenue (appellant) has appealed against an order of the Income Tax Appellate Tribunal (Tribunal) for Assessment Year 2007-08. The assessee initially declared an income of Rs. 1.75 lakhs, which was enhanced by the Assessing Officer (AO) to Rs. 26.65 lakhs. This enhancement was primarily due to Rs. 49.79 lakhs of borrowings/advances shown in the balance sheet towards an ancestral share in property, which the assessee could only substantiate to the extent of Rs. 9.7 lakhs. The AO treated the balance as unexplained cash credit under Section 68. The Commissioner of Income Tax (Appeals) dismissed the assessee's appeal. Subsequently, the AO initiated penalty proceedings under Section 271(1)(c), imposing a penalty of Rs. 16.73 lakhs. The CIT(A) then set aside the penalty, accepting the assessee's explanation that the Rs. 49.79 lakhs was commission from a property sale to be shared with partners. The Tribunal upheld the CIT(A)'s order.

What were the issues?

1. Whether the Tribunal was right in confirming the order of the CIT(A) and deleting the penalty levied under Section 271(1)(c) when the assessee could not prove borrowings/advances of Rs. 49,79,696/- towards ancestral property, despite showing Rs. 58,87,435/- in the balance sheet? 2. Whether the Tribunal was right in endorsing the order of the CIT(A) when the assessee disclosed to the CIT(A) that Rs. 49,79,696/- was commission income to be shared with real estate partners, but failed to disclose this in the original return of income? Assessee's Contention: The Rs. 49.79 lakhs was attributable to the sale of a property for Rs. 1.50 crores, out of which the assessee received Rs. 92.00 lakhs, and Rs. 49.79 lakhs was to be shared with those who assisted in the sale. The CIT(A) and Tribunal accepted this explanation. Revenue's Contention: The assessee failed to prove the balance borrowing/advances and did not disclose the commission income in the return of income, making it liable for penalty.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 143(3),Section 68,Section 5A,Section 271(1)(c),Section 148

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
1 IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 53 OF 2014 COMMISSIONER OF INCOME TAX ... Appellant Versus SHRI. WILSON WILFRED VALADARES ... Respondent Ms. Asha A. Desai, Advocate for the Appellant. Ms. Priyanka Kamat, Advocate for the Respondent. Coram:- F. M. REIS & M. S. SANKLECHA, JJ. Date:- 26th March, 2015

ORDER : This appeal under Section 260-A of the Income Tax Act, 1961 (the Act) by the Revenue challenges the order dated 27/01/2014 passed by the Income Tax Appellate Tribunal (Tribunal). The assessment year involved is AY 2007-08. 2. The appellant-Revenue has formulated the following questions of law for our consideration: A. Whether the Tribunal was right in confirming the order of Commissioner of Income Tax (A) and deleting penalty levied when the CIT(A) erred in not considering the fact that the balance sheet of the assesee has shown borrowing/advances towards ancestral share in the property at Rs.58,87,435/- and during the course of assessment proceedings, the assessee could produce the details only to the extent to Rs.9,07,738/- and balance borrowing/advances

2 amounting to Rs.49,79,696/- could not be proved? B. Whether the Tribunal was right in endorsing the order of the Ld. Commissioner of Income Tax(A) when the assessee disclosed before the Ld. CIT(A) that the income of Rs.49,79,696/- was commission received is to be shared with the partners of real estate, but failed to disclose the same in the return of income?

3.

The respondent-Assessee filed a return of income for the subject assessment year declaring a total income of Rs.1.75 lakhs. The Assessing Officer by an order dated 29/12/2009 passed under Section 143(3) of the Act determining the respondent's income at Rs.26.65 lakhs. This enhancement was on account of the fact that from the balance sheet of the respondent-Assessee it appeared that the respondent-Assessee had shown borrowings/advances towards ancestral share in property at Rs.58.87 lakhs. The Assessee was able to prove the genuineness of this borrowing/advances to the extent of Rs.9.7 lakhs. Thus the remaining amount of Rs.49.79 lakhs was treated as unexplained cash credit under Section 68 of the Act. However, in view of Section 5A of the Act an amount of Rs.24.89 lakhs was added to the respondent's declared income arriving to the aggregate income of Rs.26.65 lakhs.

4.

Being aggrieved, the respondent-Assessee filed appeals from 3 the assessment order dated 29/12/2009. The appeal was dismissed by the Commissioner of Income Tax (Appeals) by order dated 30/04/2012. The respondent-Assessee has accepted the order dated 30/04/2012 of the Commissioner of Income Tax (Appeals) in quantum proceedings.

5.

Thereafter the Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Act against the respondent-Assessee. By an order dated 27/11/2012 the Assessing Officer held that the Assessee had not disclosed the true and correct income in its return of income, thus became liable for penalty. Consequently as the tax sought to be evaded was Rs.16.73 lakhs, minimum penalty at 100% of the tax evaded i.e. Rs.16.73 lakhs was imposed upon the respondent-Assessee under Section 271(1)(c) of the Act.

6.

Being aggrieved, the respondent-Assessee filed an appeal to the Commissioner of Income Tax (Appeals). In appeal, the respondent- Assessee explained that the amount of Rs.49.79 lakhs was in fact attributable to the sale of the property for a sum of Rs.1.50 crores resulting in getting Rs.92.00 lakhs out of which Rs.49.79 lakhs were 4 to be shared with other people who had assisted in the sale of the property. This explanation offered by the respondent-Assessee was accepted by the Commissioner of Income Tax (Appeals). Consequently, no occasion to apply Section 68 of the Act would arise, as there was no cash credited to the account of the appellant and penalty under Section 271(1)(c) of the Act was set aside by order dated 24/09/2013. 7. On further appeal by the respondent-Assessee the Tribunal by the impugned order dated 27/01/2014 upheld the order of the Commissioner of Income Tax (Appeals). The impugned order also accepts the explanation offered by the respondent-Assessee and thus held no penalty is imposable under Section 271(1)(c) of the Act. Besides upholding the finding of the Commissioner of Income Tax (Appeals) that no occasion to invoke Section 68 of the Act can arise as there was no cash credited to the account of the respondent- Assessee and not being able to prove the liability does not mean furnishing of inaccurate particulars or concealing particulars of income.

8.

It is very pertinent to note that even before the order dated

5 27/11/2012 was passed by the Assessing Officer imposing penalty, the Assessing Officer had issued a reopening notice dated 22/03/2012 seeking to reopen the Assessment for AY 2007-08. This on the ground that the respondent-Assessee had in fact received an amount of Rs.92 lakhs on account of sale of property for Rs.1.50 crores. The amount of Rs.58 lakhs was not shown as its profits. This reopening notice resulted in Assessment Order dated 1/03/2013 bringing the same to tax and also imposition of penalty under Section 271(1)(c) of the Act by order dated 26/09/2013. 9. Being aggrieved, the Revenue has formulated the proposed questions of law. However, we find that the Commissioner of Income Tax (Appeals) and the Tribunal by the impugned order have accepted the explanation offered by the respondent-Assessee. Consequently holding that inability to prove a liability would not amount to furnishing of inaccurate particulars for the purpose of imposing penalty under Section 271(1)(c) of the Act. Moreover, it is pertinent to note that the appellant-Revenue has proceeded on the basis that there was in fact a sale of property as is evident from the fact that the reopening notice under Section 148 of the Act was issued on 22/03/2012 seeking to reopen the assessment for AY 2007-08. This 6 notice for reopening dated 22/03/2012 is identical to the basis of the explanation offered by the respondent-Assessee viz. that there was a sale of property which resulted in the Assessee being paid Rs.92.00 lakhs. Thus, there is no reason shown to us to disturb the concurrent findings of fact arrived at by the Commissioner of Income Tax (Appeals) and Tribunal .

10.

Accordingly, the questions as framed do not give rise to any substantial question of law.

11.

Appeal dismissed. No order as to costs.

M. S. SANKLECHA, J. F. M. REIS, J. NH/-

More judgments on Section 260-A

All 2,570 judgments and leading authorities on Section 260-A →

Recent GST High Court judgments

Search GST case law →