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Before: Shri V. Durga Rao & Shri G. Manjunatha
आयकर अपीलीय अिधकरण, ’डी’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI �ी वी दुगा� राव �ाियक सद� एवं �ी जी. मंजुनाथा, लेखा सद� के सम� Before Shri V. Durga Rao, Judicial Member & Shri G. Manjunatha, Accountant Member आयकर अपील सं./I.T.A. No. 1437/Chny/2017 िनधा�रण वष�/Assessment Year:2012-13 M/s. IRIS Engineering Industries Pvt. The Assistant Commissioner of Ltd., (Now known as M/s. Ravilla Vs. Income Tax, Corporate Circle 2, Aerospace Industries P. Ltd.), No. 178, Coimbatore. Aerodrome Road, Singanallur, Coimbatore 641 005. [PAN:AAACI8996G] (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Shri S. Sridhar, Advocate ��थ� की ओर से/Respondent by : Dr. S. Palani Kumar, CIT सुनवाई की तारीख/ Date of hearing : 21.03.2022 घोषणा की तारीख /Date of Pronouncement : 08.06.2022 आदेश /O R D E R PER V. DURGA RAO,, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 1, Coimbatore dated 31.03.2017 relevant to the assessment year 2012-13 in confirming the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 [“Act” in short].
Brief facts of the case are that the assessee M/s. IRIS
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Engineering Industries Pvt. Ltd., has not filed any return of income for the assessment year 2012-13 within the period allowed under section 139(1) or under section 139(4) of the Act. Based on specific information, a survey under section 133A of the Act was conducted in the business premise of the assessee. During the course of survey proceedings and materials impounded, it transpired that the assessee had sold its immovable property to M/s. Lakshmi Machine Works Ltd. for a total consideration of ₹.8.52 crores. Based on the findings of the survey and the materials unearthed during the proceedings, notice under section 148 of the Act was issued since there was reason to believe that the income chargeable to tax had escaped assessment within the meaning of provisions of section 147 of the Act. In response to the notice issued by the Assessing Officer under section 148 of the Act on 20.01.2015, the assessee filed its return of income on 29.10.2015 admitting total income of ₹.91,42,410/- M/s. IRIS Engineering Industries Pvt. Ltd. Subsequently, notice under section 143(2) of the Act was issued on 12.11.2015 and in response thereto, the AR of the assessee appeared and submitted the details as called for. After considering the statement of oath recorded from Shri Arun Selvaraj, Managing Director of the assessee company, the Assessing
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Officer has noted that the assessee company had received the sale consideration of ₹.8.52 crores from M/s. LMW Ltd., out of which, a sum of ₹.2 crores was already accounted in the books of Ravila Aerospace towards land advance. Accordingly, the Assessing Officer determined the long term capital gains of ₹.98,92,494/- arising out of sale of 2.84 acres of land and completed the assessment under section 143(3) r.w.s. 147 of the Act vide order dated 24.03.2016.
2.1 Since, only due to survey operation under section 133A of the Act conducted in the business premises, the assessee company came forward and filed the return of income and the assessment order was completed, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act. During the course of penalty proceedings, the assessee filed a letter dated 18.08.2016, wherein, it was stated as under: “(a) The company was a wholly owned subsidiary of M/s. Ravilla Aerospace Industries P. Ltd. And are having some factory land and buildings and condemned machinery unfit for usage, situated inside the Coimbatore city corporation limits and the company was a totally defunct company with operation or activities and no serving employees. (b) The assessee company sold the unutilized factory land and building to M/s. LMW Ltd. A widely held, publicly trading BSE listed company during the year 2011-12. All the transactions were accounted in the books of accounts of the assessee company and only the books of accounts were not fully completed and audited. The company had not
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taken any amount in cash and had not kept away from accounting the receipts as such and hid the fact of sale of land and building in any manner. Had the company done so the company could have been technically said to have concealed the income. (c) When the company was surveyed for having given huge consideration to the parent company, the fact that the company had sold the land and building and had received consideration from LMW Ltd. Was traced only from the unaudited and incomplete books of accounts of the company and not from any other documentary evidences or third party evidences. It was all there in the books of accounts that were incomplete and unaudited. This was not the only years the company had accounts in this manner but prior year also due to various internal and external reasons. From this too it can be made out that the intention of the company was not to conceal the income. (d) It would have been suicidal for the assessee company to think of concealing such a huge transaction with such a big corporate house who would have declared the purchases in totality as to the consideration paid. (e) Though the assessee company had not filed the return of income in time, before the survey, the company was voluntarily planning to approach the Income-tax Department and seed its guidance as to how to file the returns of income after the passage of due date and the time limits for doing so, the company had received the notice u/s. 148 which got the assessee one more opportunity to amend the mistake and file the return of income. (f) The company fully co-operated with the department in all manner and furnished all the required documents, statements, records and confirmations. In the process all details given by the company was accepted by the department and the return of income was accepted as such without any addition by the department and hence it is purely a technical error for non filing of return and the company has not as such concealed any income any manner.” 2.2 After considering the submissions of the assessee and facts of the case, the Assessing Officer has noted that the assessee had disclosed the income only after the survey was conducted on the
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premise of the assessee company and the return of income was filed by the assessee only after the receipt of the notice under section 148 of the Act. Since, it was the statutory obligation on the part of the assessee to disclose such income and file the return of income in the manner prescribed with in the due date prescribed in section 139(1) or under section 139(4) of the Act, the Assessing Officer rejected the plea taken by the assessee due to technical error only and was bonafide as the assessee has not proved with any supporting evidences and levied penalty of ₹.20,37,853/- under section 271(1)(c) of the Act after distinguishing the case law relied upon by the assessee and by referring to the judgement of the Hon’ble Supreme Court in the case of MAK Data P. Ltd. v CIT reported in 38 taxmann.com 448(SC) (2013).
Aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). After considering the written submissions filed by the assessee as well as case law relied upon and facts of the case, the ld. CIT(A) confirmed the levy of penalty under section 271(1)(c) of the Act by observing as under: “5. I have considered the written submission and the assessment records. In the case of the assessee, the undisputed fact is that the assessee company had taxable income by way of capital gains arising on sale of factory building and land to M/s. LMW Ltd during the year 2011-12 relevant to Asst. Year 2012-13 and the assessee company is
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under legal obligation to furnish a return of income as required under Section 139 disclosing such income. However, I find no such return was filed by the assessee under section 139 disclosing the capital gains liable to tax. It was only when the notice u/s 148 was issued to the assessee subsequent to the Survey u/s 133A carried out in this case, the assessee filed a return of income disclosing the capital gains as late as on 29.10.2015. One of the arguments of the assessee is that the income declared ill the return by the company has been accepted by the Department without any addition and there is no case for concealment or furnishing inaccurate particulars of income. In this regard, I observe that the assessee has concealed the particulars of his income within the meaning of Section 271(1)(c) by not filing the return u/s 139 duly disclosing the particulars of capital gains chargeable to tax for Asst. Year 2012-13. 6. Further, the assessee claims that the company was voluntarily planning to approach the income tax department and seek its guidance as to how to file the return of income after passage of the due date. The capital gain was disclosed only after the survey was conducted and the return of income was filed after the receipt of notice u/s 148. The assessee filed the returns on 29.10.2015 but the notice was issued on 20.01.2015 which is beyond the time limit prescribed u/s 148. The return was filed after issuing notices u/s 142(1) dated 05.06.2015 and 20.07.2015 which contradicts the statement of the assessee that the company has fully cooperated with the Department in all manner and furnished all the required documents and statements. 7. In this background, I am of the considered view that the explanation furnished against levy of concealment of penalty cannot be accepted as bonafide. The addition was riot on account of voluntary offer made by the appellant but only after the Assessing Officer finding it during the survey. In similar cases where assessees surrendered income by filing revised returns after departmental actions like surveys, enquiries etc. and such returns/ surrenders were accepted in assessment, the Courts have held that Penalty u/s 271(1)(c) is leviable finds support in the decisions of the Courts viz. Hon'ble Calcutta High Court’s decision in the case of CIT V Prasanna Dugar [2015] 371 ITR 19 (followed by dismissal of SLP by Hon'ble Supreme Court reported at 373 ITR 681, Hon'ble Delhi High Court's decision in the case of CIT Vs Usha International Ltd 254 CTR 509, Hon'ble Punjab and Haryana High court in the case of Rajesh Chawla Vs CIT 154 Taxman 364 and Hon'ble High Court of Madras in the case of R. Padmanabhan 371 ITR 211.
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The facts of the case laws quoted by the assessee are not relevant to the assessee's case. In the case of E. Krishnappa quoted by the assessee, the facts are different that the assessee has filed a belated return and to regularize the return filed by the assessee a notice u/s 148 was issued and in response the belated return was pleaded to be treated as return in response to notice u/s 148 and thereafter the Assessing Officer levied penalty. 9. Further in this case, the assessee has not submitted any documentary evidence to prove that the company was planning to approach the department. The return was not filed at all and there was no evidence to prove that the assessee company would have voluntarily filed the return accepting the capital gains but for the survey action. The conduct of the assessee, hence assumed significance in coming forward to disclose the income only after survey and later after issuance of notices u/s 142(1). But for the survey action the entire sale of land by the assessee to M/s. LMW for a consideration of Rs.8.52 Crores would have gone undetected. Therefore, the Assessing Officer is justified in levying the penalty amounting to Rs.20,37,853/- in the given facts and circumstances and accordingly uphold the same and the grounds are dismissed.” 4. On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted the assessment order passed by the Assessing Officer dated 24.03.2016 has been set aside by the ld. PCIT and therefore, the penalty proceedings initiated under section 271(1)(c) of the Act has no legs to stand. Alternatively, the ld. Counsel for the assessee has submitted that the penalty order passed by the Assessing Officer is not a valid penalty order for the reason that the assessment itself was held to be invalid for the reason that the order passed by the Assessing Officer to a non-existing company. Therefore, the penalty proceedings are liable
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to be quashed.
On the other hand, the ld. DR strongly supported the orders of authorities below.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessee filed its return of income on 29.10.2015 after survey was conducted and by issuing notice under section 148 of the Act dated 20.01.2015 and after issue of notice under section 142(1) of the Act dated 05.06.2015 and dated 20.07.2015. In the return of income, the assessee has disclosed the long term capital gains of ₹. 98,92,494/- after claiming the exemption under section 54G (investment in land). The Assessing Officer allowed the exemption under section 54G of the Act by passing the assessment order under section 147 r.w.s. 143(3) of the Act dated 24.03.2016. Thereafter, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act and levied penalty of ₹.20,37,853/- vide order dated 09.09.2016, which was confirmed by the ld. CIT(A) and the assessee preferred further appeal before the Tribunal.
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6.1 Subsequently, the ld. PCIT has issued a notice under section 263 of the Act dated 30.01.2018 that the assessment order passed by the Assessing Officer dated 24.03.2016 is erroneous and prejudicial to the interest of Revenue on the ground that the Assessing Officer has not examined the claim made by the assessee under section 54G of the Act. By considering the detailed reply filed assessee, the ld. PCIT set aside the assessment order passed by the Assessing Officer dated 24.03.2016 and directed him to examine the claim made under section 54G of the Act and redo the assessment afresh in accordance with law after giving due opportunity of being heard to the assessee by order dated 27.03.2018.
6.2 The very revision order passed under section 263 of the Act by the ld. PCIT dated 27.03.2018 was subject matter in appeal before the Tribunal. Vide order in I.T.A. No. 1837/Chny/2018 dated 13.05.2022, the Tribunal upheld the revision order passed under section 263 of the Act. In view of the above, the penalty levied by the Assessing Officer under section 271(1)(c) of Act and confirmed by the ld. CIT(A) cannot be adjudicated in the present penalty appeal. Therefore, we set aside the order passed by the ld. CIT(A) and remit the matter back to the file of the Assessing Officer to take appropriate action after passing the
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consequential order in pursuance to the order passed by the ld. PCIT under section 263 of the Act dated 27.03.2018. Thus, the ground raised by the assessee is allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on the 08th June, 2022 in Chennai.
Sd/- Sd/- (G. MANJUNATHA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 08.06.2022 Vm/- आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant, 2.��थ�/ Respondent, 3. आयकर आयु� (अपील)/CIT(A), 4. आयकर आयु�/CIT, 5. िवभागीय �ितिनिध/DR & 6. गाड� फाईल/GF.