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Facts
The assessee claimed weighted deduction for donations made to M/s Rural Development Society (RDS). Subsequently, information revealed RDS was not recognized for scientific research donations and the assessee's donation was part of a bogus racket. The assessee offered the deducted amount to tax during reassessment proceedings initiated under Section 147.
Held
The Tribunal held that the assessee's surrender of the deduction was not voluntary but was made in consequence to the notice under Section 147, after substantial time had passed since the original assessment. The penalty imposed under Section 271(1)(c) was justified as the assessee had furnished inaccurate particulars of income.
Key Issues
Whether the penalty under Section 271(1)(c) is leviable when the assessee voluntarily withdraws a deduction claim and offers it to tax during reassessment, or if the surrender was not voluntary due to the department's prior detection.
Sections Cited
143(3), 35(1)(ii), 148, 147, 271(1)(c), 274, 133A
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Before: SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL & SHRI PRABHASH SHANKAR
Date of Hearing 05.02.2025 Date of Pronouncement 10.02.2025 आदेश / O R D E R PERPRABHASH SHANKAR [A.M.] :- The instantappeal emanating from the appellate order dated 28.10.2024 is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeal)-Mumbai/ National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to the penalty order u/s271(1)(c) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 22.12.2021as passed by the National Faceless Assessment Centre, Delhi 22.12.2021as passed by the National Faceless Assessment Centre, Delhi 22.12.2021as passed by the National Faceless Assessment Centre, Delhi for the Assessment Year [A.Y.] 20 Assessment Year [A.Y.] 2016-17.
The assessee has raised The assessee has raised the following grounds of appeal:
“a. Under The facts and circumstances of the case, the learned CIT Appeals “a. Under The facts and circumstances of the case, the learned CIT Appeals “a. Under The facts and circumstances of the case, the learned CIT Appeals erred in confirming the penalty of Rs 23,14,410/ erred in confirming the penalty of Rs 23,14,410/-u/s 271(1)(c) of the IT Act. u/s 271(1)(c) of the IT Act. b. The learned CIT Appeals failed to appreciate that the penalty u/s 271(1)(c) b. The learned CIT Appeals failed to appreciate that the penalty u/s 271(1)(c) b. The learned CIT Appeals failed to appreciate that the penalty u/s 271(1)(c) of the IT Act is not leviable, where the assessee voluntarilty withdrew the e IT Act is not leviable, where the assessee voluntarilty withdrew the e IT Act is not leviable, where the assessee voluntarilty withdrew the claim of weighted deduction u/s 35(1)(ii) of the Act and offered to tax the claim of weighted deduction u/s 35(1)(ii) of the Act and offered to tax the claim of weighted deduction u/s 35(1)(ii) of the Act and offered to tax the claim in the return of income filed pursuant to notice u/s 148 of the Act as the claim in the return of income filed pursuant to notice u/s 148 of the Act as the claim in the return of income filed pursuant to notice u/s 148 of the Act as the explanation offered is genui explanation offered is genuine and Bonafide. c. The Appellant craves leave to add alter or amend any of the forgoing c. The Appellant craves leave to add alter or amend any of the forgoing c. The Appellant craves leave to add alter or amend any of the forgoing grounds of Appeal
.”
3. Brief facts of the case a facts of the case are that original assessment u/s 143(3) of the Act u/s 143(3) of the Act was made determining assessed income of Rs. 2,37,32,590/ assessed income of Rs. 2,37,32,590/ assessed income of Rs. 2,37,32,590/- under normal provision and Rs. 4,02,04,312/ provision and Rs. 4,02,04,312/- under MAT provisions by accepting the under MAT provisions by accepting the returned income. In the original return returned income. In the original return,the assessee claimed weighted assessee claimed weighted deduction u/s 35 (1)(ii) of Rs. 70,00,000/ deduction u/s 35 (1)(ii) of Rs. 70,00,000/- in respect of against donation of against donation of Rs. 40,00,000/-to M/s Rural Developme M/s Rural Development Society(henceforth ‘RDS’) (henceforth ‘RDS’)which was duly allowed. Subsequently . Subsequently, on the basis of information regarding bogus on the basis of information regarding bogus donation racket u/s 35(1)(ii) of the donation racket u/s 35(1)(ii) of the Act in the case M/s Rural Development in the case M/s Rural Development Society Hyderabad received from CBDT, proceedings u/s 147 initiated on Society Hyderabad received from CBDT, proceedings u/s 147 initiated on Society Hyderabad received from CBDT, proceedings u/s 147 initiated on 19.03.2019. As per information . As per information RDS, Hyderabad was not recognized for the Hyderabad was not recognized for the purpose of Section 35(1)(ii) and not eligible for raising any donation for purpose of Section 35(1)(ii) and not eligible for raising any donation for purpose of Section 35(1)(ii) and not eligible for raising any donation for undertaking scientific research and consequently undertaking scientific research and consequently donorswere also not eligible re also not eligible to claim any benefit of deduct claim any benefit of deduction. Assessee’s name was also indicated in the Assessee’s name was also indicated in the list of donors who had given donation to the above society and claimed given donation to the above society and claimed weighted deduction under section 35(1)(ii) of the weighted deduction under section 35(1)(ii) of the Act. Accordingly, notice 148 . Accordingly, notice 148 was issued to the assessee. was issued to the assessee. It filed return on 13.04.2019 in compliance of n compliance of notice by declaring total income of Rs. 3,07,32,590/ notice by declaring total income of Rs. 3,07,32,590/-. During the course During the course reassessment proceedings reassessment proceedings , the assessee submitted that company ha assessee submitted that company had offered to tax the entire amount of weighted deduction of Rs. 70,00,000/ to tax the entire amount of weighted deduction of Rs. 70,00,000/ to tax the entire amount of weighted deduction of Rs. 70,00,000/- claimed in the original return of income pertain turn of income pertaining to the donation of Rs. 40,00,000/ to the donation of Rs. 40,00,000/-.
The Assessing Officer at the time of assessment, reassessed the income of Rs. The Assessing Officer at the time of assessment, reassessed the income of Rs. The Assessing Officer at the time of assessment, reassessed the income of Rs.
3,07,32,590/- as declared in the ITR as declared in the ITR. He also initiated penalty procee initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing for furnishing in accurate particulars of income in respect in accurate particulars of income in respect of deduction u/s 35(1)(ii) of the Act. of deduction u/s 35(1)(ii) of the Act. Before him,it wascontented contented that the said donation to the above society was onation to the above society was made in good faith and it claimed eligible deduction on the basis of contribution receipts and certificates received from deduction on the basis of contribution receipts and certificates received from deduction on the basis of contribution receipts and certificates received from rural development society and rural development society and Matrivani Institute of Experimental Research Matrivani Institute of Experimental Research and Education. The company was neither aware of at the time of making ducation. The company was neither aware of at the time of making ducation. The company was neither aware of at the time of making donation to these institutions nor at the time of filing of original return that ese institutions nor at the time of filing of original return that ese institutions nor at the time of filing of original return that they were raising donations on the basis forged certificates. The company re raising donations on the basis forged certificates. The company re raising donations on the basis forged certificates. The company never intended to make a bogus claim for the donations made for great public never intended to make a bogus claim for the donations made for great public never intended to make a bogus claim for the donations made for great public utilities. The assessee submitted the submitted the relevant documentary evidences of relevant documentary evidences of donations during the course of original assessment proceedings which were donations during the course of original assessment proceedings which were donations during the course of original assessment proceedings which were accepted by the AO. It is stated that the assessee It is stated that the assessee came to know of the forged came to know of the forged certificates of RDSon receipt of the notice u/s 148 and therefore, of on receipt of the notice u/s 148 and therefore, of on receipt of the notice u/s 148 and therefore, offered to tax the entire weighted deduction of Rs. 70,00,000/ the entire weighted deduction of Rs. 70,00,000/- claimed in the original claimed in the original return pertaining to donations made of Rs. 40,00,000/ return pertaining to donations made of Rs. 40,00,000/- - to these two institutions. This offer was done in good faith in order to buy peace and avoid institutions. This offer was done in good faith in order to buy peace and avoid institutions. This offer was done in good faith in order to buy peace and avoid litigation. The AO observed that o erved that on the basis of information received from n the basis of information received from CBDT and examining other relevant details, proceedings u/s 147 for initiated CBDT and examining other relevant details, proceedings u/s 147 for initiated CBDT and examining other relevant details, proceedings u/s 147 for initiated and notice u/s 148 was issued to the assessee. There was concrete informa and notice u/s 148 was issued to the assessee. There was concrete informa and notice u/s 148 was issued to the assessee. There was concrete information with the AO that M/s RDS with the AO that M/s RDS was bogus society and not entitled for deduction ot entitled for deduction u/s 35(1)(ii) and was not eligible for raising any donation for undertaking any not eligible for raising any donation for undertaking any not eligible for raising any donation for undertaking any scientific research. As per information, society was receiving donations on the As per information, society was receiving donations on the As per information, society was receiving donations on the basis bogus/fake documents and returning donation amount to the assess basis bogus/fake documents and returning donation amount to the assess basis bogus/fake documents and returning donation amount to the assessees in cash after deducting commission. It was a racket running through bogus in cash after deducting commission. It was a racket running through bogus in cash after deducting commission. It was a racket running through bogus entities and receiving so called donations from the donors so called donations from the donors and returning cash and returning cash to them after deducting certain amount of commission. to them after deducting certain amount of commission. When notice u/s 148 When notice u/s 148 issued to the assessee as it it was also beneficiary oftaking deduction u/s 35(1)(ii) was also beneficiary oftaking deduction u/s 35(1)(ii) which was bogus entities, which was bogus entities, it surrendered the weighted deduction in the return surrendered the weighted deduction in the return filed in compliance of notice u/s 148. filed in compliance of notice u/s 148. Sensing the bogus claim of deduction, Sensing the bogus claim of deduction, assessee came forward for surrendering the a assessee came forward for surrendering the amount of deduction and not mount of deduction and not before proceedings u/s 147. before proceedings u/s 147.It is stated by the AO that the assessee was well ssessee was well aware about the bogus entity of claiming deduction u/s 35(1)(ii) but never aware about the bogus entity of claiming deduction u/s 35(1)(ii) but never aware about the bogus entity of claiming deduction u/s 35(1)(ii) but never came forward to surrender the same until or unless notice u/s 148 was served came forward to surrender the same until or unless notice u/s 148 was served came forward to surrender the same until or unless notice u/s 148 was served upon him. So claim of the assessee that upon him. So claim of the assessee that itsuo-moto surrendered the amount moto surrendered the amount the donation in the revise return c the donation in the revise return could not be accepted. If it was so, asseesee . If it was so, asseesee would have option of filing a revise return before that and would have paid due would have option of filing a revise return before that and would have paid due would have option of filing a revise return before that and would have paid due tax before initiating the proceedings u/s 147. tax before initiating the proceedings u/s 147. It was awaiting till the notice u/s was awaiting till the notice u/s 148 was served upon him and upon sensing the bogus entity and claim 148 was served upon him and upon sensing the bogus entity and claim 148 was served upon him and upon sensing the bogus entity and claim of deduction by the assessee in the ITR, surrendered of donation deduction deduction by the assessee in the ITR, surrendered of donation deduction deduction by the assessee in the ITR, surrendered of donation deduction claimed in the original ITR. claimed in the original ITR.So it was held that assessee had committed d committed default of furnishing inaccurate particulars of income knowingly and without any of furnishing inaccurate particulars of income knowingly and without any of furnishing inaccurate particulars of income knowingly and without any reasonable cause and was was liable to penalty u/s 271(1)(c) for furnishing of u/s 271(1)(c) for furnishing of inaccurate particulars of income. inaccurate particulars of income.
In the subsequent appeal,the assessee submitted the same arguments as In the subsequent appeal,the assessee submitted the same arguments as In the subsequent appeal,the assessee submitted the same arguments as made before the AO.However,the ld.CIT(A) endorsed the findings and made before the AO.However,the ld.CIT(A) endorsed the findings and made before the AO.However,the ld.CIT(A) endorsed the findings and observations of the AO upholding the pe observations of the AO upholding the penalty and dismissed the appeal of the nalty and dismissed the appeal of the assessee.
Before us,during hearing of the case,the ld.AR has repeated the same Before us,during hearing of the case,the ld.AR has repeated the same Before us,during hearing of the case,the ld.AR has repeated the same contentions as made before the authorities below.It is submitted that the contentions as made before the authorities below.It is submitted that the contentions as made before the authorities below.It is submitted that the assessee made a bonafide claim in the return filed and assessee made a bonafide claim in the return filed and voluntaril voluntarily surrendered the said deduction in response to the return u/s 148 which was also accepted the said deduction in response to the return u/s 148 which was also accepted the said deduction in response to the return u/s 148 which was also accepted by the AO as per the returned income.He also placed reliance on the decision by the AO as per the returned income.He also placed reliance on the decision by the AO as per the returned income.He also placed reliance on the decision of coordinate Bench of ITAT Mumbai in of coordinate Bench of ITAT Mumbai in of coordinate Bench of ITAT Mumbai in ITA No.3299/3300/3301/Mum/2017 in the case of Armoury International and Ashvin Naraya Bajori in International and Ashvin Naraya Bajori in ITA No. oury International and Ashvin Naraya Bajori in ITA No.
369/SRT/2022 of ITAT,Surat(SMC). 369/SRT/2022 of ITAT,Surat(SMC).The ld.Departmental Representative,on The ld.Departmental Representative,on the other hand relied upon the orders of authorities below. the other hand relied upon the orders of authorities below.
We have carefully pondered over all relevant facts of the case on We have carefully pondered over all relevant facts of the case on We have carefully pondered over all relevant facts of the case on record,rival submissions and the provisions of the law in this regard.We do not regard.We do not find any infirmity in the penalty order. mity in the penalty order. The cited decisions of the ld.AR The cited decisions of the ld.AR are distinguishable and not applicable to the case in hand. distinguishable and not applicable to the case in hand.Inthe ese decisions,the issue basically pertained issue basically pertained to satisfaction drawn by the assessee which is not the to satisfaction drawn by the assessee which is not the issue here.In the present case,there is absolutely no doubtthat the assessee In the present case,there is absolutely no doubtthat the assessee In the present case,there is absolutely no doubtthat the assessee surrendered the impugned deduction only in consequence to the notice u/s surrendered the impugned deduction only in consequence to the notice u/s surrendered the impugned deduction only in consequence to the notice u/s 148 of theAct.It is evident that the original asses 148 of theAct.It is evident that the original assessment in this case was framed sment in this case was framed on21.12.2018.Notice u/s 148 was issued Notice u/s 148 was issued claim on 20.02.2019 con on 20.02.2019 consequent to the receipt of information by the AO re the receipt of information by the AO regarding the bogus nature of the garding the bogus nature of the.Return u/s 147 was filed on u/s 147 was filed on 13.04.2019.Thus,there was a substantial substantial time gap between the original assessment and the filing of return u/s 147.Therefore,it between the original assessment and the filing of return u/s 147.Therefore,it between the original assessment and the filing of return u/s 147.Therefore,it cannot be said by any stretch of ima ot be said by any stretch of imagination that the impugned surrender was gination that the impugned surrender was bonafide and made voluntarily. bonafide and made voluntarily. The AO has rightly observed that if it was so, The AO has rightly observed that if it was so, asseesee would have option of filing a revise ption of filing a revised return before that and would return before that and would have paid due tax before initiating the proceedings u/s 147. Assessee was have paid due tax before initiating the proceedings u/s 147. Assessee was have paid due tax before initiating the proceedings u/s 147. Assessee was awaiting till the notice u/s 148 was served upon him and upon sensing the awaiting till the notice u/s 148 was served upon him and upon sensing the awaiting till the notice u/s 148 was served upon him and upon sensing the bogus entity and claim of deduction by the assessee i bogus entity and claim of deduction by the assessee in the ITR, sur n the ITR, surrendered of P a g e | 7 donation deduction claimed in the original ITR which donation deduction claimed in the original ITR which was found to was found to be bogus for which penalty was justified. penalty was justified.
In this case,the return return was filed u/s 147,after enquiry by the department after enquiry by the department which revealed that the which revealed that the deduction claimed in the original return filed was claimed in the original return filed was bogus.On identical facts, in On identical facts, in the case of Jyoti Laxman Konkar vs Jyoti Laxman Konkar vs CIT(2007) 209 CTR 5(Bom)/ 292 ITR 163, 09 CTR 5(Bom)/ 292 ITR 163, the hon’ble jurisdictional the hon’ble jurisdictional High Court held that the AO as well as the Tribunal having come to the conclusion held that the AO as well as the Tribunal having come to the conclusion held that the AO as well as the Tribunal having come to the conclusion that the assessee had filed the initial return dishonestly with a view to conceal the income and the assessee had filed the initial return dishonestly with a view to conceal the income and the assessee had filed the initial return dishonestly with a view to conceal the income and the revised return was filed out of compulsion, i.e. after having found that the assessee had the revised return was filed out of compulsion, i.e. after having found that the assessee had the revised return was filed out of compulsion, i.e. after having found that the assessee had concealed the income and. filed a false return with a view to avo concealed the income and. filed a false return with a view to avoid tax liability.Whether id tax liability.Whether there is concealment of income or not has to be decided with reference to the facts of a given there is concealment of income or not has to be decided with reference to the facts of a given 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 case and the fact finding authorities under the Act having come to the conclusion that in the case and the fact finding authorities under the Act having come to the conclusion that in the facts of the case, the assessee had concea facts of the case, the assessee had concealed the income initially with a view to avoid the led the income initially with a view to avoid the payment of tax, we are of the view that no substantial question of law is involved in this payment of tax, we are of the view that no substantial question of law is involved in this payment of tax, we are of the view that no substantial question of law is involved in this case requiring the admission of the appeal. Consequently, the same is hereby dismissed.In case requiring the admission of the appeal. Consequently, the same is hereby dismissed. case requiring the admission of the appeal. Consequently, the same is hereby dismissed.
the case of Mak Data Private Limited v. CIT Mak Data Private Limited v. CIT (2013) 358 ITR (2013) 358 ITR 593(SC)where also the surrender of income in this case the surrender of income in this case was not voluntary in not voluntary in the sense that the offer of surrender was made in view of detection made by the A the offer of surrender was made in view of detection made by the A the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee search conducted in the sister concern of the assessee,it was held that it cannot be said that it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings the surrender of income was voluntary. AO during the course of assessment proceedings the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application has noticed that certain documents comprising of share application has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax statements, memorandum of association of companies, affidavits, copies of Income Tax statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been Returns and assessment orders and blank share transfer deeds duly signed, have been Returns and assessment orders and blank share transfer deeds duly signed, have been P a g e | 8 impounded in the course of survey proceedings under impounded in the course of survey proceedings under Section 133A Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of than 10 months before the assessee filed its return of income. Had it been the intention of than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return ke full and true disclosure of its income, it would have filed the return ke full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the declaring an income inclusive of the amount which was surrendered later during the declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no course of the assessment proceedings. Consequently, it is clear that the assessee had no course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its to declare its true income. It is the statutory duty of the assessee to record all its to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to transactions in the books of account, to explain the source of payments made by it and to transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. declare its true income in the return of income filed by it from year to year. declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had view, has recorded a categorical finding that he was satisfied that the assessee had view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under concealed true particulars of income and is liable for penalty proceedings under concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961. of the Income Tax Act, 1961.
7.1In view of the above discussion,we hold that the penalty was rightly In view of the above discussion,we hold that the penalty was rightly In view of the above discussion,we hold that the penalty was rightly imposed on the assessee for claiming deduction imposed on the assessee for claiming deduction on bogus deduction u/s on bogus deduction u/s 35(1)(ii) of the Act in the original ITR and notwithstanding its in the original ITR and notwithstanding its in the original ITR and notwithstanding its subsequent surrender of the impugned impugned deduction which was in no case a voluntary act on deduction which was in no case a voluntary act on its part.We,therefore, uphold the penalty order and also the appellate order. uphold the penalty order and also the appellate order. uphold the penalty order and also the appellate order.
8.In the result,the appeal of the In the result,the appeal of the assessee is dismissed.
Order pronounced in the open court on Order pronounced in the open court on 10.02.2025.