K MOHAN,CHENNAI vs. ACIT, CW 22(1), CHENNAI

The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-10, Chennai in dated 28.02.2019 for the assessment year 2008-09.

The ld.AR submitted that the assessee filed his return of income for the assessment year 2008-09 on 01.04.2009 admitting a total income of Rs.12,91,169/-. A survey was conducted at the premises of the assessee on 17.11.2014 by the DDIT(Inv.), Unit 4(3), Chennai. During the post survey proceedings, the assessee admitted income for the assessment year 2008-09 at Rs.97,38,400/-. Subsequently, the AO issued a notice U/s.148 on 25.03.2015. The assessee filed a revised return on 15.07.2015, admitting a total income of Rs.97,38,400/- with all taxes duly paid. The AO accepted the returned income in the reassessment, however, due to difference in calculation of interest, a demand of Rs.3,23,260/- was raised which was also paid on 07.06.2016. Thereafter, the AO initiated penalty proceedings U/s.271(1)(c) and levied penalty U/s.271(1)(c). Aggrieved against that order, the assessee filed an appeal before the CIT(A) and the ld.CIT(A) dismissed the appeal. Aggrieved against that order, the assessee is on appeal before this Tribunal.

The ld.AR submitted that the revised income admitted by the assessee was accepted by the AO without any addition. The ld.AR invited our attention to the copy of sworn statement recorded U/s.131 on 17.11.2014 at the time of survey and submitted that the assessee could not determine his profit year-wise. However, he replied that he would have made a profit of Rs.20 crores in the past six years which he has not disclosed so far and he would like to offer the same as his un-disclosed income over and above his income, offered for taxation. He has also requested to grant 2 days time to provide the required workings for the year-wise profit. Accordingly, he admitted the undisclosed income from financial years 2013-14 to 2008-09. Since the statement was recorded in financial year 2014-15, the income admitted for financial year 2007-08 i.e., for this assessment year 2008-09 is voluntary. Therefore, he pleaded that since the income admitted for this assessment year i.e., AY 2008-09 is voluntary, it cannot be said that the assessee has concealed his income or furnished any particulars. Provisions of Section 271(1)(c) are not attracted in this case as there is no malafide intention or deliberate or wilful motive to mislead the Revenue is said to be existing. Therefore, he pleaded that the levy of penalty U/s.271(1)(c) is not warranted and hence pleaded to allow the appeal. He relied on the same case laws which he relied in support of his contention before the ld.CIT(A). The ld.AR further submitted that while levying the penalty, the AO has not reduced the original income admitted by the assessee at Rs.12,91,169/- in the original return and he levied the penalty on the taxes on Rs.96,38,000/-, i.e., on the total income admitted in the revised return which included the total income of Rs.12,91,169/- admitted in the original return income also.

Per contra, the ld.DR invited to the relevant portion of the sworn statement relied on by the AR and the orders of the lower authorities submitted that the assessee was doing real estate business and he was a land aggregator. He has not maintained any books of account till the financial year 2010-11. From the statement recorded, it is clear that the Revenue found a lot of materials during the course of survey and on confrontation, the assessee agreed to admit Rs.20 crores for the past six financial years, which he has not disclosed so far. On the post survey enquiry and on further confrontation of material, etc., the assessee admitted Rs.97,38,000/- as his income for the assessment year 2008-09. On receipt of intimation/report, the AO found that the assessee originally disclosed a total income of Rs.12,91,169/- only. Therefore, he issued a notice U/s.148 and thereafter the assessee admitted the total income at Rs.97,38,000/-. Since, the appellant did not disclose the true income in the original return, the AO levied penalty on the income admitted in the revised return holding that the assessee concealed the income and filed inaccurate particulars in the return. It is an admitted fact that only after the survey, the assessee has admitted substantial income, whereas the original income admitted was Rs.12,91,169/- only. On confrontation of evidences and discrepancies noticed during the survey, the assessee admitted such huge undisclosed income in order to regularise his sources of investments in the undisclosed assets. But for the survey, the assessee would never have disclosed the income. Therefore, it tantamounts to concealment of income. The various case laws relied on by the assessee were distinguished by the ld.CIT(A) and held that in the assessee’s case, the huge surrender of income made by the assessee has direct nexes to the findings of the survey outcome. Therefore, the ld.DR pleaded that the penalty levied U/s.271(1)(c) be confirmed.

We have considered the rival submissions. The facts are that the assessee filed the return for assessment year 2008-09 admitting total income of Rs.12,91,169/-. It is clear that during the survey, the department found various materials and confronted the assessee. After the survey, the assessee on going through such materials quantified the total income for the assessment year 2008-09 at Rs.97,38,000/- and admitted the same before the DDIT(Inv.), Unit- 4(3). On receipt of such intimation, the AO issued notice U/s.148. The assessee filed revised return of Rs.97,38,000/- which was reassessed and penalty proceedings U/s.271(1)(c) was initiated. During the penalty proceedings,the assessee has not given any explanation towards the discrepancy between the difference in the income admitted in the original and the revised returns. Therefore, the AO held that the assessee offered this income due to survey action and therefore, it is proved beyond doubt, that the assessee has concealed income / filed inaccurate particulars. The AO relied on the Hon’ble Supreme Court decision in the case of M/s. MAK Data (P) Ltd vs. CIT dt. 30.10.2013. Before the ld.CIT(A), the assessee relied on the Hon’ble Supreme Court decision in the case of Shri Suresh Chandra Mittal which was distinguished by the ld.CIT(A), stating that the explanation rendered by the assessee in that case was treated as bonafide and penalty was not leviable, whereas, in the assessee’s case, the assessee has not discharged his statutory duty of declaring true and correct income in the return filed by him prior to the survey and he surrendered huge income, which had direct nexes to the findings of the survey outcome. The ld. CIT(A) found that the assessee has failed to offer any explanation in respect of the difference between the original income and the revised income and sustained the penalty levied by the AO. Before us also, the assessee is not able to offer any explanation in respect of the difference of income admitted between the original and revised returns as required under Explanation 1 of section 271(1)(c) of the Act. Therefore, the differential sum, between the revised return and original return is deemed to represent the income in respect of which particulars have been concealed. Therefore, we sustain the penalty levied U/s.271(1)(c) to that extent. As pointed out by the ld.AR, the levy of penalty could be made only on the tax that is sought to be evaded on the undisclosed income of Rs.84,88,831/- (Rs.97,80,000 - Rs.12,91,169) only. Therefore, we direct the AO to recompute the penalty U/s.271(1)(c), accordingly. The assessee’s appeal is allowed to this extent.

In the result, the assessee’s appeal is partly allowed.