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Income Tax Appellate Tribunal, DELHI BENCH “Friday”: NEW DELHI
Before: SHRI PRASHANT MAHARISHI & SHRI K.N.CHARY
O R D E R PER PRASHANT MAHARISHI, A. M.
ITA No 265 / Del / 2012 A Y 2002-03 1. This is an appeal filed by the assessee against the order of the ld CIT(A)-I, New Delhi dated 21.10.2011 for the Assessment Year 2002-03 wherein the learned CIT – capital is confirmed the penalty of INR 6285118/– levied by the learned assessing officer u/s 271 (1) (C) of the income tax act. 2. The assessee has raised the following grounds of appeal in for the Assessment Year 2002-03:- “1. That the learned Commissioner of Income-tax (Appeals)-II, New Delhi has erred in confirming the penalty imposed by the ld Assessing Officer without providing sufficient opportunity to the appellant and without considering the material available on record.
2. That it is accordingly prayed that the additions confirmed by the learned Commissioner of Income-tax (Appeals) may kindly be deleted.”
3. The brief facts of the case shows that a search was conducted in the case of the assessee and the assessment was completed u/s 153A read with section 143 (3) of the income tax act where in various additions were made in the hands of the appellant. The assessee approached the settlement commission and had made an admission of INR 3,300,000 on account of Page | 1 suppression of sales and receipts. However, the settlement commission declared the application filed by the appellant as invalid because the assessee did not pay the taxes on the declared income. The learned CIT – A also confirmed the above addition in the hands of the appellant to the extent of INR 1 7605370/–. Therefore the learned assessing officer found that assessee is liable for imposition of penalty u/s 271 (1) ( c) for concealment of income. The learned assessing officer levied the penalty of INR 6 285118/– on concealed income of INR 1 7605370/–.
4. The assessee preferred an appeal before the learned CIT – A. The learned CIT – A granted several opportunities to the assessee , however the assessee did not make any representation or made any submission before him and therefore, he decided the issue on merit and found that since the appellant has not disclosed this income during the course of search as well as before the assessing officer but before the settlement commission and also did not pay the tax on the disclosed income before the settlement commission and therefore the assessee is not eligible for any immunity for levy of the penalty and therefore he found that when the assessee has shown that there is a suppression of sales amounting to INR 3,300,000 the amount was not disclosed before the search hence it cannot be regarded as a voluntary. In view of this he upheld the penalty levied by the learned assessing officer of INR 6 285118/–.
5. The assessee is in appeal before us. The only ground that it has raised his that no sufficient opportunity has been granted by the lower authorities before the levy of the penalty. He also submitted that the order of the learned CIT appeal – A was contested by the assessee before the coordinate bench in ITA number 1384/del/2009 in ITA number 1057/del/2009 by both the parties and therefore as per the order dated 31/8/2018 the assessee has been granted certain relief and matter has been set aside to the file of the learned assessing officer for verification of the certain items. He therefore submitted that the penalty should not have been levied by the learned assessing officer when the matter is pending before Tribunal.
The learned departmental representative vehemently supported the order of the learned lower authorities and submitted that assessee has remained completely non cooperative before the lower authorities and therefore there is no reason to delete the above penalty. He further stated that the assessee has disclosed INR 3,300,000 as suppression of sales as per its own admission therefore on this amount the penalty cannot be deleted at all. With respect to the other addition, he submitted that the sum of the bogus share capital of INR 7 805370/– has also been considered by the coordinate bench and confirmed the same. Wth respect to the bogus unsecured loan he submitted that the coordinate bench has set aside the issue back to the file of the learned assessing officer with a direction to re-examine the same. In view of this he submitted that there is a confirmed addition of INR 3,300,000 on account of suppressed sale and receipts and of INR 7,800,000 on account of bogus share capital, on which the penalty cannot be deleted as assessee has concealed income.
We have carefully considered the rival contention and perused the order of the lower authorities. With respect to the argument of the learned authorised representative that there is no sufficient opportunity granted to the assessee is devoid of any merit. The order of the learned assessing officer and the order of the learned CIT – A shows that during the total assessment proceedings and the appellate proceedings the assessee has been given umpteen numbers of opportunities, many summons were issued but assessee has not complied with them. Before CIT – A the assessee was also given innumerable opportunities of hearing, however, none of them was availed by this assessee. In view of this, it is apparent that assessee does not want to represent its case before the lower authorities but at higher forum would agitate the issue of the penalty, stating that no sufficient opportunity was granted to the assessee. This is nothing but a ploy to get the issue set aside to the file of the learned assessing officer and to delay the process of the justice.
We have also seen that the order of the learned CIT – A has been contested by the assessee as well as the revenue before the coordinate bench and the coordinate bench has pronounced its order dated 31/08/2018 has confirmed the addition of INR 7 805370/– on account of bogus share capital as per para number 22 of the order. This issue was further agitated by the assessee before the honourable Delhi High Court. Honourable Delhi High Court as per order dated 16/01/2019 (2019) 102 taxmann.com 392 (Delhi)
has upheld the order of the coordinate bench confirming the addition of bogus share capital. In view of this, the assessee has concealed income to the extent of the above sum and penalty has been rightly levied and confirmed by the lower authorities.
With respect to the other sum of suppression of the cash receipt of INR 3,300,000, the above sum was never disclosed by the assessee in the return of income, therefore it is a concealed income of the assessee and penalty has been rightly levied by the lower authorities on the sum. Therefore we confirm the penalty u/s 271 (1) (c) of the income tax act on the above addition of bogus and capital as well as the suppression of the sales receipt of INR 3,300,000.
With respect to the 3rd addition of INR 6,500,000 the coordinate bench set aside the whole issue back to the file of the learned assessing officer as per para number 26 of the order. As the issue has been set aside to the file of the learned assessing officer for re-examination of the full facts, for the time being we delete the penalty with a direction to the learned assessing officer, to re-examine the issue of penalty after making compliance with the direction of the coordinate bench only. Accordingly, the issue of levy of penalty on the above sum of INR 6,500,000 is restored back to the file of the learned assessing officer.
In the result appeal filed by the assessee for AY 2002-03 is partly allowed.
Now we come to the appeal filed by the assessee for AY 2005-06.
AY 2005-06 against the order of the learned Commissioner Of Income Tax (Appeals) – I, New Delhi dated 21/10/2011 wherein the penalty levied by the learned the Asst Commissioner Of Income Tax, Central Circle – 13, New Delhi (the learned AO) u/s 271 (1) (c) read with section 274 of the income tax act 1961 as per order dated 30/3/2010 of INR 4 698190/– was confirmed.
The assessee has raised the following grounds of appeal in for the Assessment Year 2005-06:-
1. That the learned Commissioner of Income-tax (Appeals)-II, New Delhi has erred in confirming the penalty imposed by the ld Assessing Officer without providing sufficient opportunity to the appellant and without considering the material available on record.
2. That it is accordingly prayed that the additions confirmed by the learned Commissioner of Income-tax (Appeals) may kindly be deleted.” 15. The brief fact shows that assessment u/s 153A read with section 143 (3) of the act was completed for assessment year 2005 – 06 and 30/11/2007 at the total income of INR 3 7898400/–. The assessee preferred an appeal before the learned CIT – A- 1 granted the substantial relief to the assessee. After the grant of the relief the learned CIT – A confirmed the disallowance to the extent of INR 6 883782 with respect to the advance received against the export of goods. The deferred revenue expenditure of Rs. 2950195/– was claimed by the assessee however same was confirmed by the learned CIT – A. Further sum of INR 1 300000/– was disclosed by the assessee as suppressed sales in receipts before the settlement commission however the assessee did not pay the tax thereon and therefore the proceedings before the settlement commission got abetted on 30/9/2007, the learned AO made the addition of the above amount. The learned CIT – A also confirmed the above addition as per his order. There was also an issue of unaccounted sales which was added by the learned assessing officer however, the learned CIT – A disallowed 20% of the unaccounted sales by applying the provisions of section 40A (3) of the income tax act amounting to INR 1 705240/–. Therefore the learned assessing officer noted that the assessee has concealed the above income and therefore the penalty of INR 4 698190/– was proposed to be levied. The learned AO granted sufficient opportunity to the assessee and assessee submitted a written reply on 20/3/2010 submitted that the since the disclosure was made by him voluntarily before the settlement commission no penalty should be levied. The assessee also pleaded senior financial constraints. However the learned AO rejected the contention of the penalty and stated that the disclosure by the assessee before the settlement commission did not give any immunity from imposition of penalty as the assessee has failed to deposit the requisite amount of the tax. He therefore held that assessee has concealed the income. Accordingly he passed an order u/s 271 (1) ( c) of the act on 30/3/2010 levying the penalty of INR 4 698190 being hundred percent of tax sought to be evaded on concealed income of INR 1 2839217/–. 16. Assessee preferred an appeal before the learned Commissioner of income tax (appeals). The learned CIT – A granted several opportunities as mentioned Page | 5 in paragraph number 3 of his order. However the assessee did not avail and therefore the learned assessing officer giving a detailed reasoning as per para number 5 – 14 of his order confirmed the levy of the penalty. Aggrieved by the order of the learned CIT – A assessee preferred an appeal before us.
The learned authorised representative vehemently contested the levy of the penalty and submitted that assessee has disclosed the sum of INR 1 300000/– before the settlement commission however assessee could not pay the tax because of the severe financial constraints. He therefore submitted that the disclosure of the assessee was voluntary and mere failure of payment of the tax should not result into the penalty for concealment of income. With respect to the addition made by the learned CIT – A u/s 40 A (3) of the income tax act he submitted that it is the disallowance based on which the penalty has been levied. He further submitted that mere disallowance of the above expenditure cannot result into the penalty u/s 271 (1) © of the income tax act for concealment of the total income. With respect to the claim of the deferred revenue expenditure of Rs. 2950195 he submitted that it is merely disallowance of the expenditure which should not result into penalty for concealment of income. With respect to the advanced sales proceeds received from a foreign party he submitted that assessee could not export the goods to the assessee. He extensively referred to para number 6 of the order of the learned assessing officer and stated that out of the total addition of Rs. 8835006/– the learned CIT – A has upheld the disallowance/addition to the extent of only INR 6 883782/–. He stated that assessee has furnished the complete particulars of the above item. Therefore there is no concealment of income on that account. He then stated that the assessee has not concealed the income as held by the learned assessing officer.
The learned departmental representative vehemently supported the order of the lower authorities and submitted that assessee has concealed the income and therefore the penalty has been levied by the learned assessing officer and confirmed by the learned CIT – A. He stated that sufficient opportunity has been given to the assessee at all the stages however the assessee did not avail those opportunities and therefore the assessee cannot not lead that no proper opportunity has been given. He extensively referred to the order of the learned assessing officer stating that each and every item has been considered by the learned assessing officer and proved that there is a concealment of income by the assessee. In view of this he submitted that the penalty levied by the learned assessing officer, confirmed by the learned CIT – A should be confirmed.
We have carefully considered the rival contention and perused the orders of the lower authorities. Now we deal with each item on which the penalty has been levied by the learned assessing officer.
The learned assessing officer has considered that assessee has concealed a sum of INR 1 300000/– as suppressed sales and receipt. The fact resulting to the above addition shows that the learned assessing officer has made the above addition because of disclosure made by the assessee before the settlement commission however, no taxes have been paid and therefore the proceedings before the settlement commission got abetted on 30/9/2007. The learned assessing officer made the above addition which was confirmed by the learned CIT – A. As the above sum was disclosed by the assessee himself before the settlement commission as undisclosed income of the assessee, we do not find any merit in the argument of the learned authorised representative that assessee has not concealed the above income. In view of this the penalty u/s 271 (1) ( c) of the income tax is confirmed on the above amount and the order of the learned CIT – A is confirmed.
With respect to the disallowance u/s 40 A (3) of the income tax act the fact shows that the learned assessing officer has made an addition of INR 8 526204/– on account of the unexplained investment u/s 69 of the income tax act whereas the learned CIT – A has deleted the above addition. However, he invoked the provisions of section 40A (3) of the income tax act 1961 stating that based on the seized documents the assessee has constructed the books of accounts and in those books of accounts assessee has recorded the above sales in cash. Out of the above cash sales assessee has incurred expenditure which are in violation of the provisions of section 40A (3) of the income tax act. Therefore the addition of INR 1 705240/– was made. In the present case the learned assessing officer made the addition on account of undisclosed sales whereas the learned CIT – A found that the undisclosed sales has been properly accounted by the assessee in the books of accounts , however out of those undisclosed sales, certain expenditure in Cash were made and on those expenditure the provisions of section 40A (3) of the income tax act was invoked and disallowance was made. Merely because the expenditure are disallowed the assessee does not make himself exposed to the provisions of section 271 (1) (c) of the income tax act for concealment of income. The assessee has disclosed the complete details of that expenditure in its books of accounts. In view of this, the learned assessing officer has wrongly levied penalty for concealing the income. Therefore to that extent on this issue we direct the learned assessing officer to delete the penalty levied for concealment of income u/s 271 (1) (c) of the income tax act.
With respect to the advances received against the export of goods, the learned assessing officer made the addition of Rs. 8835006/–, however the learned CIT – A on examination of the books of the assessee as well as the subsequent export made by the assessee has deleted the addition partly. However with respect to the balance of INR 6 883782/–, the assessee has neither exported those goods or returned the sum to the buyer. The assessee could not give any explanation even before us that why till date no export has been made or the advance received has been refunded back. It is also pertinent to note that the sum was received by the assessee in financial year 2006 and this matter was heard in financial year 2019. The assessee also could not show before us or before the lower authority, any efforts made by the assessee for refunding the above sum. In view of this we have no hesitation in confirming the penalty levied by the learned assessing officer and confirmed by the learned CIT – A on the above sum.
With respect to the claim of the deduction of deferred revenue expenditure of rrs. 2950195/– the assessee submitted that the above expenditure has been incurred by the assessee for exploring the future business opportunities. The learned AO disallowed the above sum u/s 37 of the income tax act as assessee failed to prove that the expenditure is wholly and exclusively laid out or expended for the purposes of the business of the assessee. In absence of any clarity about the purposes for which the