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Income Tax Appellate Tribunal, “ SMC ” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
आदेश / O R D E R
PER PRADIP KUMAR KEDIA - AM: Both the captioned appeals filed at the instance of the Revenue are against the common appellate order of the Commissioner of Income Tax(Appeals)-4, Ahmedabad [CIT(A) in short] dated 12/10/2015 in the matter of penalty imposed under s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") by the AO vide its orders
ITA Nos.3600 & 3601/Ahd/2015 ACIT vs. M/s.Mehta Finance Asst.Years –2011-12 & 2012-13 - 2 - identically dated 28/03/2014 relevant to Assessment Years (AYs) 2010- 11 & 2012-13 respectively.
Since the issues are involved common, both the appeals have been heard together and are being disposed of by this common order.
In both appeals, the Revenue is aggrieved by the order of CIT(A) in deleting penalty imposed under s.271(1)(c) of the Act quantified at Rs.37,03,219/- and Rs.48,35,445/- for AYs 2011-12 & 2012-13 respectively.
Briefly stated, the assessee, a partnership-firm, is engaged in the business of money lending and finance. The assessee filed its original return of income for AY 2011-12 on 27/09/2011 declaring total income of Rs.26,60,000/-. Subsequent to the filing of return, a survey was conducted at the premises of the assessee under s.133A of the Act on 14/02/2013 where certain incriminating documents were found and consequently the assessee made a disclosure of certain unaccounted income for various years. Subsequent to survey, a revised return was filed relevant to AY 2011-12 and AY 2012-13 where the income earlier declared were revised to include unaccounted income detected in survey. The assessment was thereafter completed under s.143(3) of the Act and the revised income so declared was assessed as such at the same figure. As a sequel to the assessment, penalty order under s.271(1)(c) of the Act
ITA Nos.3600 & 3601/Ahd/2015 ACIT vs. M/s.Mehta Finance Asst.Years –2011-12 & 2012-13 - 3 - relevant to assessment years 2011-12 & 2012-13 were also passed. In the respective penalty orders, the Assessing Officer (AO) observed that in the course of survey, certain incriminating documents in the form of diary and loose-papers were found and impounded from the premises of the Assessee. It was further noted that statement of assessee was also recorded in which the assessee conceded the fact of unaccounted income arising from money lending business. The AO thereafter noted that on the basis of evidences found during the course of survey by the Income- tax Department, the assessee inter alia disclosed additional income for AY 2011-12 at Rs.1,19,84,531/- and Rs.1,56,48,690/- for AY 2012-13. The AO accordingly concluded that the unaccounted income detected and conceded is susceptible to penalty as the same was not shown by the assessee in the original return of income for these assessment years filed prior to the survey. The AO held that the concealed income was declared when detected by the Department as a result of survey under s.133A of the Act. Consequently, a minimum penalty @100% on the income sought to be evaded was quantified and imposed as penalty by resorting to section 271(1)(c) of the Act.
Aggrieved, the assessee preferred appeal before the CIT(A) against the aforesaid action of the AO and challenged the merits of imposition of penalty. The CIT(A) after taking into account various submissions made by the assessee, came to the conclusion that penalty imposed by the AO
ITA Nos.3600 & 3601/Ahd/2015 ACIT vs. M/s.Mehta Finance Asst.Years –2011-12 & 2012-13 - 4 - is not justified for AYs 2011-12 & 2012-13 broadly on ground that (i) the initial disclosure was made on estimated basis, (ii) revised return was filed with 15 days of survey, (iii) no reasons were mentioned for initiation of penalty and (iv) revised return were found to be correct and no query was raised about the findings of survey. The CIT(A) placed heavy reliance on the plea of the assessee that the disclosure was made to buy peace of mind and to save the good-will of the firm. The CIT(A) accordingly reversed the action of the AO and deleted the penalty for both the assessment years.
Aggrieved, the revenue preferred the appeal before the Tribunal.
The Ld.DR for the Revenue, at the outset, submitted that the CIT(A) has misdirected itself in law and on facts in cancelling the imposition of penalty. The Ld.DR exhorted that the assessee filed a return of income under s.139(1) prior to survey whereby took its position on the income earned. After the filing of the return of income, survey was carried out and certain loose-papers and documents were found which were confronted to the assessee. The assessee readily accepted the factum of undisclosed income and offered estimated additional income of varied amounts for different assessment years. The exact undisclosed additional income was thereafter included in the revised return filed pursuant to survey action. Therefore, the concealed income detected as a
ITA Nos.3600 & 3601/Ahd/2015 ACIT vs. M/s.Mehta Finance Asst.Years –2011-12 & 2012-13 - 5 - result of survey after the filing of the return of income cannot escape the clutches of penalty provisions.
The Ld.AR, on the other hand, extensively relied upon the order of the CIT(A) and submitted that the undisclosed income was declared to buy peace of mind and to save loss of goodwill based on the understanding that no penalty and prosecution proceedings will be initiated against aforesaid declarations. The Ld.AR thereafter submitted that CIT(A) has rightly decided the issue in favour of the assessee more so because the assessee has fully co-operated in the survey proceedings and is not guilty of concealment of any income per se.
We have carefully considered the rival submissions and perused the material available on record. The limited issue in both the captioned appeals before us is whether unaccounted income detected in the course of survey relevant to an assessment year and included in the return revised after the survey proceedings conducted under s.133A of the Act is susceptible to imposition of penalty on the amount so detected in the course of survey proceedings or not. Relevant to the present appeals, the original return for both the assessment years 2011-12 and 2012-13 were filed prior to survey. As a consequence of survey, certain additional income (Rs.1,19,84,531/- - 2011-12; Rs.1,56,48,690/- - 2012-13) were included in the revised return of income. On facts, we notice reference to
ITA Nos.3600 & 3601/Ahd/2015 ACIT vs. M/s.Mehta Finance Asst.Years –2011-12 & 2012-13 - 6 - certain diary, loose-paper and chits stated to be found in the business premises of the assessee after the filing of the return of income. On being confronted, the partner of the assessee-firm conceded that some of the entries as found in the loose-papers etc. are not recorded in the books of accounts. After considering these loose-papers/chits etc. certain additional income were readily offered for various financial years in the course of survey. Thereafter, exacting figures were included as additional income in the revised return for AYs 2011-12 & 2012-13. The question that arises for our consideration in these facts are whether penalty under s.271(1)(c) of the Act can be imposed on such additional income or not.
9.1. It is well-settled that concealment takes place on the date when the return is filed without disclosing the true particulars of income of that year as held by the Apex Court in the case of Brij Mohan vs. CIT 120 ITR 1 (SC). It is also held by the Hon’ble Supreme Court that the law which prevails on the date of filing of such return would be applicable for levy of such penalty. It implies that offence of concealment takes place as soon as the return is filed without incorporating true income and not showing any bonafide reasons for such failure.
9.2. In the instant case, the original return of income was filed disclosing certain income which was admittedly understated. Thereafter
ITA Nos.3600 & 3601/Ahd/2015 ACIT vs. M/s.Mehta Finance Asst.Years –2011-12 & 2012-13 - 7 - survey was conducted and incriminating material were found. It is evident from the statement recorded in the course of survey that the declarations made were based on tangible incriminating material. The return was consequentially revised and exact quantification of additional income of varied amount were made for the different assessment years and the revised return was accordingly filed. In these circumstances, facts belie the assertions that the non-disclosure of the additional income in the original return of income and found in the course of survey was due to any bonfide and inadvertent mistake. The deposition made in the statement is corroborated by incriminating material and subsequent revised return of income. As a concomitant, we do not find any force in the plea of the assessee that the declaration was made merely to buy peace and to protect good-will of the firm alone. The assessee was left with no choice as a consequence of survey but to include the aforesaid income in the revised return.
9.3. The burden to prove mitigating circumstances for not including the correct income in original return of income is on assessee which is not found to be discharged at all. It is a clear cut-case where the assessee had sought to conceal the true income by underreporting the true income in the original return. In the absence of a bonafide and a plausible explanation for not including the true income in the original return, the assessee is liable to penalty proceedings which is provided as a remedy
ITA Nos.3600 & 3601/Ahd/2015 ACIT vs. M/s.Mehta Finance Asst.Years –2011-12 & 2012-13 - 8 - for the loss of possible revenue.. No explanation worth the name was offered by the assessee and the surrender was made only after tangible corroborating material were found during the survey of the business premises of the assessee. To reiterate, onus squarely lies upon the assessee to prove its bonafides. Mere averment that the disclosure was made to buy peace and to save goodwill per se is of no consequence. We do not, in the same vain, find any sort of commitment on the part revenue that penalty proceedings will not be initiated as requested by the assessee. Unilateral request of assessee in this regard without existence of any corresponding promise is of no binding consequence and cannot compel the AO to exercise its discretion in favour of assessee.
Therefore, we do not find any iota of merit in the conclusion drawn by the CIT(A) in these facts while cancelling the penalty imposed by the AO. We find that the action of the AO in imposing the penalty under s.271(1)(c) of the Act in both the captioned appeals is in tune with law and cannot be faulted. The CIT(A), on the other hand, has failed to apply its mind to the facts judiciously and has wrongly appreciated the unequivocal facts. The order of the CIT(A) cancelling the penalty for both the assessment years are thus set aside and respective penalty orders of the AO are restored.
ITA Nos.3600 & 3601/Ahd/2015 ACIT vs. M/s.Mehta Finance Asst.Years –2011-12 & 2012-13 - 9 -
In the result, both the appeals of the Revenue are allowed.
This Order pronounced in Open Court on 05/ 01 /2018
Sd/- Sd/- (महावीर �साद) (�द�प कुमार के�डया) �या�यक सद�य लेखा सद�य ( PRADIP KUMAR KEDIA ) ( MAHAVIR PRASAD ) JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 05/ 01 /2018
ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-4, Ahmedabad �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation .. 2.1.2018 (dictation-pad 24- pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …3.1.2018 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….5.1.18 7. Date on which the file goes to the Bench Clerk…………………5.1.18 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………