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Income Tax Appellate Tribunal, PUNE“A” BENCH, PUNE
Before: HON’BLE SHRI SS VISWANETHRA RAVI & SHRI G. D. PADMAHSHALI
ORDER PER G. D. PADMAHSHALI, AM; By the present appeal, the assessee challenges the order of Commissioner of Income Tax (Appeals)-8, Pune [for short “CIT(A)”] dt. 17/12/2019 passed u/250 of the Income-tax Act, 1961 [for short “the Act”] confirming the order of penalty [for short “PO”] dt. 29/09/2016 passed u/s 271(1)(c) of the Act by Dy. Commissioner of Income Tax Circle-7, Pune [for short “AO”] for the assessment year [for short “AY”] 2013-14. ITAT-Pune Page 1 of 11 M/s. IVRCL- KIPL Joint Venture AY: 2013-14 2. Facts of the case borne out case records, pithily stated as; 2.1 The assessee is resident joint venture [for short “JV”] of M/s IVRCL Limited [IVRCL] and M/s Kakade Infrastructure Pvt. Ltd. [KIPL] engaged in the business of construction contracts, where it was awarded a contract by Municipal Corporation of Greater Mumbai [MCGM] in the financial year 2009. The awarded contract in terms of JV agreement was then sub- contracted equally between JV partners viz IVRCL and KIPL after retaining 6% of value of contract as its share by the assessee. The KIPL in turn parted its share of sub-contract in favour of IVRCL after retaining 30% of sub-contracted price, whereas the contract work is actually effected & completed by IVRCL alone.
2.2 In this background, the assessee filed its return of income [for short “ITR”] for AY 2013-14 declaring total income of ₹3,99,16,140/-, which was subsequently revised with even figures. The ITR was subjected to scrutiny under CASS by which assessee was called upon to substantiate the additions made to ITAT-Pune Page 2 of 11 M/s. IVRCL- KIPL Joint Venture AY: 2013-14 creditors in the impugned assessment year for sum of ₹21,71,91,898/- with the balance confirmation letter.
2.3 Failure to substantiate the balance due to creditor namely one of the JV partner KIPL, the assessee voluntarily offered a consolidated sum of ₹46,29,97,799/- as its income for three assessment years viz; AY 2012-13 to 2014-15, of which ₹17,55,54,540/- represented income of the assessee for the AY under adjudication. The Ld. AO delineating the arrangement made by JV partners whereby certain percentage of sub-contracted price was retained in the garb of JV agreement, has pinpointed the slicing of income by planting KIPL as middleman carrying no work under a awarded contract and holding this arrangement as colouring device to evade the taxes, framed the assessment by bringing to tax income so offered by the assessee u/s 143(3) of the Act and initiated the penal proceeding for furnishing inaccurate particulars of income as well as concealment of income within the meaning of section 271(1)(c) of the Act. ITAT-Pune Page 3 of 11 M/s. IVRCL- KIPL Joint Venture AY: 2013-14 2.4 During the penal proceedings u/s 271(1)(c), the Ld. AO identifying the balance retained by KIPL (a JV partner) without carrying out any actual work under sub-contract, opined such an arrangement as mere a device created to lower the profits or income in the hands of assessee, and consequently put the assessee to show-cause (vide show cause notice dt. 28/06/2016) as to why a an order imposing penalty should not be passed u/s 271(1)(c) of the Act.
2.5 Rejecting the contention of the assessee that said income was offered voluntarily relates to JV partner KIPL, but same was offered by the assessee to purchase peace with the department and avoid protracted legal proceedings, the Ld. AO in the light of various judicial precedents, imposed a minimum penalty @100% of tax sought to be evaded for furnishing inaccurate particulars as well concealment of income u/s 271(1)(c) of the Act.
2.6 Aggrieved thereby, the assessee carried the matter before first appellate authority [for short ITAT-Pune Page 4 of 11 M/s. IVRCL- KIPL Joint Venture AY: 2013-14 “FAA”] reiterating all its submission made before Ld. AO, however of no success. For the reason, the assessee is in appeal before the Tribunal alleging that, both the Ld. TAB erred in imposing penalty u/s 271(1)(c) on the income voluntarily offered, with the following grounds of appeal; “1.The learned AO has failed to appreciate the fact that - The assessee JV offered the amount of Rs. 17,55,54,540/- voluntarily as income of the IVRCL - KIPL JV on its own, though it was obvious that the income belonged to KIPL-the other JV partner. The assessee showed this gesture to purchase peace of mind with the I. T Authorities & to avoid prolonged litigation.
2.The learned AO has failed to appreciate the fact That the assessee is an honest tax payer and has been paying its tax dues as per schedule committed to the I.T Authorities as follows — Paid date Amount Paid 29/03/2016 2,00,00,000/- (R(Rs.) 24/06/2016 50,00,000/- 2,2,00,00,000/- 27/07/2016 50,00,000/- 50,00,000/- 23/08/2016 50,00,000/- /- 23/09/2016 50,00,000/- 09/02/2018 86,96,100/- Total paid 4,86,96,100/- 86,96,100/- till date 4,86,96,100/- ITAT-Pune Page 5 of 11 M/s. IVRCL- KIPL Joint Venture AY: 2013-14 3.The learned AO has failed to deliver natural justice to assessee due to the fact that The gesture of the assessee to offer such income for tax was totally ignored by the AO and additionally, the AO levied penalty u/s 271(1)(c).
4.On the grounds mentioned from (1) to (3), the assessee requests the Appellate Authorities to drop the penalties & give justice to the aggrieved assessee.
5.The Appellant assessee craves leave to add alter amend modify and or delete any or all of the grounds mentioned above.”
At the outset, we voice that, the grounds raised in the appeal memo are inconsonance with rule 8 of Income Tax Appellate Rules, 1963 [for short “ITAT- Rules”], however for the purpose of adjudication, it shall be suffice to articulate that, the sole and substantive grievance under the present appeal is that, penal provision u/s 271(1)(c) is not attracted where any sum is voluntarily offered to tax in the course of assessment proceedings to buy peace and to avoid protracted litigation.
ITAT-Pune Page 6 of 11 M/s. IVRCL- KIPL Joint Venture AY: 2013-14 4. During the course of physical hearing, the learned counsel for the assessee [for short “AR”] meticulously taken us through the order of quantum addition, order imposing penalty and submitted that, in the event of failure to adduce balance confirmation from creditors, the appellant in order to avoid lingering litigation, has voluntarily offered the income in its hand which indeed arisen to KIPL on account of sub-contracting in terms of JV agreement, and this act of the assessee cannot be equated with furnishing of inaccurate particulars. Au contraire the learned representative of the department [for short “DR”] bolstered the legality of imposition and survival of penalty by drawing our attention to the decision of Hon’ble Supreme Court in “Mak Data P. Ltd. VS CIT” reported in 358 ITR 573 and submitted that, assessee entitles no relief in the garb of words like voluntarily offered to tax, on the contrary declaration of income came when assessee failed to substantiate balance due to creditor who happens to be one of the JV partner, therefore present appeal stands meritless.
ITAT-Pune Page 7 of 11 M/s. IVRCL- KIPL Joint Venture AY: 2013-14 5. After hearing to rival contentions of both the parties; and subject to the provisions of rule 18 of ITAT-Rules, perused the material placed on record, case laws relied upon by the appellant as well the respondent and duly considered the facts of the case in the light of settled legal position which are forewarned to parties present.
It is an admitted fact that, the appellant was awarded a contract by MCGM which was sub- contracted by it equally between its two JV partners viz; IVRCL and KIPL at a price lower than 6% of awarded value. In turn KIPL retaining 30% of sub- contracted price, assigned its share of sub-contract to IVRCL, thereby generated surplus without carrying any work under the contract. By this arrangement, the revenue under the contract found diverted in the hands of KIPL being examined and in the event of failure to substantiate the credit balance due to KIPL, the appellant during the course of assessment proceedings offered the sliced share as its income for the assessment year under consideration. ITAT-Pune Page 8 of 11 M/s. IVRCL- KIPL Joint Venture AY: 2013-14 7. The appellant has only stated that, it has declared the additional sum as its income with a view to avoid litigation and to buy a peace and to make amicable settlement with the income tax department. The offer or surrender of income in this case is not voluntary in the sense that the offer or surrender was made when the Ld. AO detected the leakage of income in the hands of assessee which was sliced by it to KIPL as JV partner without being participating in the actual contract work and in the event of failure to prove correctness of balances due to KIPL, in such a situation, it cannot be said that the declaration or surrender of income was voluntary by the appellant, all the more the law does not recognize those types of defences under Explanation 1 to section 271(1)(c).
It is trite law that the voluntary disclosure or declaration or surrender per se does not discharge the assessee from the mischief of penal proceedings u/s 271(1)(c), as the law does not provide that the assessee be pardoned from penalty when it makes a voluntary disclosure of its concealed income. ITAT-Pune Page 9 of 11 M/s. IVRCL- KIPL Joint Venture AY: 2013-14 9. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed return declaring an income inclusive of amount which was so declared or surrendered later during the course of the assessment proceedings, consequently, it is clear that the assessee had no intention to declare its true income while filing of its return. On the other hand Ld. AO, has recorded a categorical finding in assessment order and was satisfied himself that the assessee had concealed true particulars of income whereby its exposed to penalty proceedings u/s 271(1)(c) of the Act.
Nota bene, in the similar facts and circumstance, where the income of the appellant is assessed in variation to income returned, the Hon’ble Supreme Court in the case of “MAK Data Pvt Ltd Vs CIT” (supra) observed that, the explanation to section 271(1) raises a presumption of concealment when income is finally assessed in variation of returned income, and it was in this factual scenario where the income reported by the assessee in the return filed ITAT-Pune Page 10 of 11 M/s. IVRCL- KIPL Joint Venture AY: 2013-14 was lower than the income finally assessed and brought to tax, it is held that the penalty was rightly leviable irrespective of the fact whether such variation was on account of voluntary offer or surrender of income or otherwise.
Apropos, in view of aforesaid discussion, all grounds stands adjudicated against the appellant and in favour of revenue and nothing contrary has been shown to us in the present facts which would warrant our taking a different view.
3. Resultantly, the appeal of the appellant assessee is DISMISSED in terms aforestated observations. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Thursday 08th day of December, 2022.