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Income Tax Appellate Tribunal, ‘A’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI INTURI RAMA RAO]
आदेश / O R D E R
PER INTURI RAMA RAO, ACCOUNTANT MEMBER These are appeals filed by the assessee directed against different orders of the ld. Commissioner of Income Tax (Appeals)-19,
ITA Nos.754 to 756/2015 :- 2 -:
Chennai (in short ‘’the CIT(A)’’) dated 30.12.2014 for assessment years 2000-01, 2001-02 and 2007-08 respectively.
Since, the identical facts and issues are involved in these 2.
appeals, we proceed to dispose the same vide this common order.
For the sake of convenience and clarity the facts relevant to the 3.
appeal in ITA No.754/Chny/2015 for assessment year 2000-2001 are
stated herein.
The Assessee raised the following grounds of appeal: 4.
The order of the learned Commissioner of Income Tax (Appeals) is opposed to law and facts of the case.
The learned Commissioner of Income tax (Appeals) erred in confirming the penalty of Rs.5,57,301/-levied U/s 271 (1) (C) of the Act.
This was a search case and in the course of search operations, the appellants father had admitted that the entire income had arisen from the real estate operations and offered the entire income and also to pay the taxes there on in his hands as also other family members and the company. In fact over 2.5 crores of taxes were paid even before the completion of Assessment and the fact that the same is not denied by the Assessing Officer proved the Appellant’s bona fides. The learned assessing officer had himself observed in the penalty order that “the assessee admitted a undisclosed income in the course of search and paid tax on such undisclosed income”. Since material facts concerning undisclosed income were disclosed in the course of search proceedings and substantial tax was also paid, the appellant satisfies the conditions laid down in the Explanation (5) to section 271 (1) (C) of the Act.
ITA Nos.754 to 756/2015 :- 3 -:
The learned Commissioner of Income Tax erred in relying on the Supreme Court’s decision in the case of Mak data Pvt Limited since it was a case where the assessee did not come out with full disclosure even after 10 months of survey proceedings in the case of the sister concern.
The two conditions laid down under the Explanation (1). to 271 (1) (C) are fully satisfied by the appellant in that for each and every addition in the appellant gave his explanation which was bonafide.
Since the appellant made a full disclosure even in the course of search proceedings and the additions made in the assessment were due to only mistakes committed in the computation of the correct concealed income, the supreme court decision in the case of CIT VS Suresh Chandra mittal 251 ITR page 9 alone applied to the facts of the case.
For the above and such other grounds, as may be adduced with the permission of the Honourable income Tax Appellate Tribunal, it is prayed that the Appeal may be allowed and Rs. 5,57,031/- penalty levied may be deleted’’.
The brief facts of the case are as under: 5.
The appellant is an individual engaged in the business of real
estate. There was search and seizure operations conducted in the
case of Shri. K. Sundarraj, who is the father of the appellant on
21.09.2005 and during the course of search, certain alleged
incriminating materials were stated to have been seized.
Consequently, notice u/s.153C of the Act was issued to the assessee
on 28.08.2006. In response to such notice, the return of income for
ITA Nos.754 to 756/2015 :- 4 -:
the assessment year 2000-01 was filed on 26.03.2007 disclosing total
income of Rs. 23,38,865/-. Against the said return of income, the
assessment was completed by the Assistant Commissioner of Income
Tax, Central Circle-I(5), (Addl. Charge) Chennai vide order dated
31.12.2007 passed u/s. 143(3) r.w.s 153C of the Act at total income
of Rs.44,04,489/- after making the following additions:-
‘’Agricultural Income : 1,77,250/-
Unexplained Investment in Pallangi Village : 2,96,120/-
Unexplained Investment in Vyasarpadi : 20,99,850/- Building
Unexplained Investment In Kodaikanal : 1,50,000
Unexplained Investment in Vilpatti Village : 25,445/
Unexplained investment in Bank : 3,00,000/-
Long Term Capital Gain : 10,92,758/-
The Assessing Officer initiated penalty proceedings u/s.271 (1) (c) of
the Act by issuing show cause notice u/s.274 r.w.s. 271 (1) ( c) of the
Act. In response to the same, the appellant had filed explanation vide
letter dated 29.05.2008 which is extracted by the Assessing Officer at
para 3 of the penalty order. The sum and substance of the explanation
offered by the assessee in respect of addition No.1 & 3 are that the
ITA Nos.754 to 756/2015 :- 5 -:
assessed income has been offered as undisclosed income and
therefore levy of penalty were not justified. The Assessing Officer
considering the explanation held that long term capital gains arising
on sale of land at Pallangi Village, was not disclosed in the original
return of income or in the return of income filed in response to
notice issued u/s.153C of the Act. The assessee could not prove that
capital gains had arisen prior to 01.04.1999. In the case of alleged
unexplained investments in land at Kodaikanal , the Assessing Officer
further observed that the appellant had not fulfilled the condition
stipulated to avail the benefit of immunity from the imposition of
penalty proceeding provided in Explanation (5) to Section 271 (1) ( c)
of the Act and therefore proceeded to levy penalty u/s.271 (1) (c ) of
the Act vide order dated 16.06.2008 at �5,57,301/-.
Being aggrieved by levy of penalty, the assessee preferred 6.
an appeal before ld. CIT(A), who vide impugned order dismissed the
appeals of the assessee for assessment years 2000-01 and 2001-02.
Being aggrieved by the above decision of the CIT(A), the 7.
appellant is in appeal before us in the present appeals. It is
submitted before us that assessee admitted undisclosed income during
the course of search and paid tax on such undisclosed income and
therefore levy of penalty is not warranted and he also placed reliance
ITA Nos.754 to 756/2015 :- 6 -:
on the decision of Hon’ble Supreme Court in the case of CIT vs. Suresh
Chandra Mittal, 251 ITR 9. He further contended that the ld. CIT(A)
ought not have upheld the decision of Hon'ble Supreme Court in the
case of MAK Data (P) Ltd vs. CIT, 38 taxmann.com 448. Further, he
submitted that relevant column in the show cause notice was not
struck off, therefore he filed the additional grounds of appeal,
wherein it was stated as under:-.
‘’1. The CIT(A) erred in sustaining the levy of penalty u/s 271(1)(c) of the Act for the Assessment Year under consideration despite the wrong initiation of the proceedings in the show cause notice dated 31.12.2007 by the Assessing Officer without assigning proper reasons and justification.
The CIT(A) failed to appreciate that the lack of precise charge within the scope of section 271(1)(c) of the Act as to whether the penalty was leviable for concealment of income or furnishing inaccurate particulars of income while initiating the penalty proceedings in issuing the show cause notice would vitiate the consequential penalty order under consideration and accordingly ought to have appreciated that the order imposing penalty u/s 271(1)(c) of the Act should be reckoned as invalid in the eyes of law’’.
Ld. Authorised Representative further submitted that the additional
grounds of appeal are purely legal in nature and goes to the root of
the matter and therefore the same must be admitted in the light of
the law laid by the Hon’ble Supreme Court in the case of National
Thermal Power Co. Ltd vs. CIT, 229 ITR 383. Further, it is submitted
ITA Nos.754 to 756/2015 :- 7 -:
that the show cause notice is not clear whether notice is for
concealment of income or furnishing inaccurate particulars of income.
Therefore, the assessee was not sure of the charge made against him
and in the light of the decision of Hon’ble Karnataka High Court in the
case of CIT vs. Manjunatha Cotton and Ginning Factory, 359 ITR 565,
which was affirmed by the Hon'ble Supreme Court in the case of SSA’s
Emerald Meadows in CC No.11485 of 2017 dated 05.08.2016 by
dismissal of the SLP citing the above circumstances, ld. Authorised
Representative prayed for squashing of penalty proceedings.
Considering the submissions made by the assessee, the
additional grounds of appeal are admitted for adjudication. The ratio
of the decision of Hon’ble Karnataka High Court in the case of
Manjunatha Cotton and Ginning Factory (supra) is not applicable to the
facts of the present case as in the present case, the assessee had
offered explanation in response to show cause notice having fully
understood the show cause notice. Further, the Bangalore Bench of
the Tribunal in the case of P.M.Abdulla vs. ITO (in ITA Nos.1223 &
1224/Bangalore/2012, dated 17.10.2016) had held that this cannot be
a valid reason for deletion of the penalty u/s.271(1) (c) of the Act by
holding as under:-
ITA Nos.754 to 756/2015 :- 8 -:
‘’9. We heard rival submissions and perused material on record. The only issue involved is whether levy of penalty u/s.271(1) ( C) is valid in law keeping in view the decision of the Jurisdictional High Court in the case of Manjunatha Cotton &Ginning Factory (supra). The contention of the assessee is that since the Assessing Officer had not ticked off the relevant column in the show cause notice, it goes to prove that the Assessing Officer had not reached satisfaction before initiating proceedings u/s.271(1) ( c). The contention of the learned Counsel for assessee that the relevant column has not been ticked, cannot be accepted as it is found from material placed before us that for both the years, the column relevant to concealment of particulars of income has been ticked by the Assessing Officer. In any event, it is found that the assessee had offered an explanation for concealment of particulars of income only. The assessee, at no stage of penalty proceedings and at no stage had complained of violation of the principles of natural justice. Thus, no prejudice is caused on account of any omission or commission in the show cause issued. The provisions of Section 292B clearly lay down that :-
“’ Return of income, etc, not to be invalid on certain grounds:
292B:- No return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.
The Hon’ble Jurisdictional High Court had neither considered nor brought to the notice of the Hon’ble High Court, provisions of Section 292B of the Act. Even assuming that there is a defect in the show cause notice issued, as canvassed by the learned Counsel for assessee that will vitiate the entire penalty proceedings, the judgment was rendered by the Hon’ble High Court in the case of Manjunatha Cotton & Ginning Factory (supra) without considering the provisions of Section 292B. Subsequently, the Hon’ble Jurisdictional High Court in the case of CIT vs. Sri Durga Enterprises (2014) 44 taxmann.com 442 (Kar) while dealing with the validity of notice u/s.148 of the Act as valid and responded to it in letter and spirit and participated in the proceedings and in light of the provisions of
ITA Nos.754 to 756/2015 :- 9 -:
Section 292B, notice issued u/s.148 was held to be valid. The relevant paragraph of judgment is extracted below:-
In the present case, as observed earlier, the assessee not only responded to the notice under Section 148 of the Act within one month, but on the basis of the return filed earlier, participated in the proceedings till the matter reached the FAA and was disposed of. A glance at Section 292B of the Act, shows that under this provision, certain Acts are not to be treated as invalid, may be by reason of any mistake, defect or omissions, either in return of income, assessment, notice, summons or other proceedings. In other words, a notice cannot be invalidated by reason of any mistake, such as the one occurred in the present case, namely, the period of filing return of income was not specified as contemplated by Section 148 of the Act. If such a defect is not allowed to be cured, or treated as invalid so as to declare the notice invalid, despite the fact that assessee had taken that notice as valid and responded to it in letter and spirit and participated in the proceedings, the very purpose/objective of the provisions contained in Section 292B of the Act would stand frustrated/defeated. The intent of the Legislature is clear from the language employed in this provision which states that a defective notice, such as the one in the present case, cannot be declared invalid by reason of any mistake, defect or omission, if the notice in `substance' and in `effect' is in conformity with or according to the intent of purpose of this Act. The intent or purpose of issuing the notice is to call upon the assessee to file return, if the Assessing Officer finds that income has escaped the assessment. This being the intent and purpose of the provisions contained in Section 148 of the Act, in our opinion, it stands satisfied if the notice is responded within reasonable time, which in the present case was 30 days, irrespective of the fact whether the period was specified or not in the notice for filing return of income. In the present case, if the assessee had not responded to this notice at all and had raised such ground of challenge, perhaps, he would not succeed. But having responded and participated in the proceedings, he cannot be allowed to turn around and raise objection for the first time before the Tribunal seeking invalidation of the proceedings initiated by issuing notice under Section 148 of the Act. In the circumstance, we allow this appeal answering both the substantial questions of law in favour of the Revenue and against the assessee. In view of the
ITA Nos.754 to 756/2015 :- 10 -:
peculiar facts and circumstances of the case, there shall be no order as to costs. Thus, having regard to the ratio laid down by the Hon’ble Jurisdictional High Court in the subsequent decision in the case of Sri Durga Enterprise (supra) we hold that show cause notice issued u/s.274 r.w.s 271(1) ( c) cannot be held to be invalid’’.
Further, the Hon'ble Supreme Court in the case of Kantamani
Venkata Narayana and Sons vs. First Additional Income Tax Officer,
Rajamundhry, (1967) 63 ITR 638 had held that mere mistake in the
show cause notice does not render the show cause void null and void.
Furthermore, mere dismissal of the SLP does not mean laying down
law by the Hon'ble Supreme Court and therefore the decision of
Hon'ble Supreme Court in the case of Kantamani Venkata Narayana
and Sons (supra) prevails over the decision of Hon’ble Karnataka High
Court in the case of Manjunatha Cotton and Ginning Factory (supra).
Thus, in the light of the legal positions enumerated above, the
additional grounds of appeal filed by the assessee are dismissed.
Coming to the merits of levy of penalty, admittedly, 9.
undisclosed income was returned in response to notice issued
u/s.153C of the Act and additions in respect of capital gains made in
the assessment proceedings for investment made in land at Pallangi
Vilage and Vysarpadi Building. The immunity contemplated under
unexplained investment is applicable only in the case when if the
ITA Nos.754 to 756/2015 :- 11 -:
amount found during the search is surrendered and tax with interest
is paid and the assessee had disclosed the manner in which he had
derived undisclosed income. In the present case, admittedly,
assessee had only paid taxes partly and all the assessed income was
also not disclosed in the return of income. Therefore, it can be said
that assessee had failed to fulfill the requirement of the explanation
(5) to Section 271 (1)(c) of the Act and levy of penalty is valid as held
by Hon’ble Punjab and Haryana High Court in the cases of Surender
Paul vs. CIT, (2006) 287 ITR 223 and Ashok Kumar Gupta vs. CIT,
287 ITR 376. In the result, the appeal of the assessee in ITA
No.754/CHNY/2015, for assessment year 2000-2001 is dismissed.
ITA No.755/Chny/2015, for Assessment Year 2001-2012
Since, the facts in the present appeal is identical to the facts
in ITA No.754/Chny/2015, for assessment year 2000-2001 for the
reasons mentioned therein, we dismiss the appeal on the above lines
indicated in appeal ITA No.754/Chny/2015 supra. Hence, the above
captioned appeal filed by the assessee is dismissed.
In the result, the appeal of the assessee in ITA 10.
No.755/CHNY/2015, for assessment year 2001-2002 stands dismissed.
ITA Nos.754 to 756/2015 :- 12 -:
Now, we take up appeal of the assessee in ITA 11.
No.756/CHNY/2015, for assessment year 2007-2008 for adjudication.
The assessee raised the following grounds of appeal:- 12.
‘’1.The order the learned Commissioner of Income tax (Appeals) is opposed to law and facts of the case.
In the return originally filed under section 139 (4) of the Act the appellant admitted a capital gains of 54,43,464. In the course of assessment proceedings the appellant furnished a details before the Assessing Officer explaining that the correct capital gains were only 35,72,678. This was accepted by the assessing officer after due scrutiny of the evidence filed by the assessee.
The assessment was later reopened to include certain other capital gains amounting to RS.829680 and also a business income of Rs.686001 which the appellant included in the original return but which was omitted to be assessed by the then assessing officer. In the present assessment the learned assessing officer had revoked the decision taken by the Assessing Officer in the original assessment assessing the capital gains at Rs.35,72,678/-. In the reassessment the learned assessing officer had assessed the capital gains in respect of these assets at Rs.54,43,464/- as originally returned by the Appellant ignoring the fact that this part of assessment had become final in the original assessment after due scrutiny of the evidence produced by the Appellant in the original assessment.
The reason adduced by the assessing officer is that the appellant filed only a revised statement in the course of original assessment proceedings and no revised return was filed is not an issue in the re assessment proceedings.
3.The learned Commissioner of Income Tax (Appeals) erred in confirming the assessment made by the assessing officer assessing the capital gains at Rs.54,43,464/- as against the correct capital gains of Rs.44,02,358/-.
ITA Nos.754 to 756/2015 :- 13 -:
4.The learned assessing officer had conceded in the assessment order that the correct capital gains is only Rs.44,02,358/- but assessed the capital gains of RS.54,43,464/- on the ground that this was returned in the original return, ignoring the fact that the assessment of capital gains to the extent of 35,72,678 had become final in the original assessment and filing only a detailed statement and not a revised return happened in the course of original assessment proceedings and these are not relevant issues before the assessing officer in the re assessment proceedings.
For the above and such other grounds has may be adduced with the permission of the appellate tribunal, it is prayed that the appeal may be allowed’’.
The brief facts of the case are as under: 13.
The appellant is an individual engaged in the business of
dealing in land. The original return of income for the AY 2007-08 was
filed on 29.03.2008 disclosing total income of Rs. 74,45,470/- including
capital gains. Against the said return of income, the assessment was
completed by the Assistant Commissioner of Income Tax, Central
Circle- I(5) (i/c) Chennai vide order dated 30.12.2011 passed u/s.
143(3) r.w.s. 147 of the Income Tax Act, 1961 (for short ‘the Act’) at
total income under normal provisions of �14,84,916/- and capital gains
of �35,72,678/-. Subsequently, the Assessing Officer noticed from the
statement filed by the assessee during the course of original
assessment proceedings that assessee has revised statement showing
capital gain at �44,02,358/-. Based on this, he formed an opinion that
ITA Nos.754 to 756/2015 :- 14 -:
the income assessable to tax has escaped assessment and issued
notice u/s.148 of the Act on 30.03.2011. In response to notice, no
return of income was filed by the assessee . However, revised return
of income was filed on 14.12.2011, wherein profits and gains from
business and profession of �6,86,001/- was shown. However, the
Assessing Officer had not taken cognizance of return of income which
was filed belatedly and proceeded with assessment by assessing the
capital gains at �54,43,464/- as disclosed in the original return of
income vide order dated 30.12.2011 passed u/s.143(3) r.w.s 147 of
the Act.
Being aggrieved, an appeal was preferred before the ld. 14.
CIT(A), who vide impugned order dismissed the appeal placing
reliance on the judgment of Hon'ble Supreme Court in the case of CIT
vs. Sun Engineering Works (P) Ltd, 64 Taxman 442.
Being aggrieved by the order of the ld. CIT(A), the appellant 15.
is in appeal before us in the present appeal. It is contended that there
was no reason to believe that income escaped assessment and
therefore initiation of reassessment proceedings are not valid in law.
Without prejudice to the above, the ld. Authorised Representative
submitted that the Assessing Officer ought to have taken cognizance
of revised statement of capital gains notwithstanding the fact that
ITA Nos.754 to 756/2015 :- 15 -:
revised return of income was filed beyond the due date stipulated
under the Act.
On the other hand, the ld. Sr. Departmental Representative 16.
placed reliance on the orders of lower authorities.
We heard the rival submissions and perused the material on 17.
record. The revised statement of capital gains filed by the assessee
during the course of original assessment proceedings shown the
capital gains at �44,02,358/- enabled the Assessing Officer to form an
opinion that income escaped assessment. Hence, we uphold the
validity of reassessment proceedings.
Now coming to the issue on the merits of the addition, the 18.
Assessing Officer ought to have computed capital gains in accordance
with law notwithstanding the fact that there is no valid revised return
in response to notice issued u/s.148 of the Act. There is no bar to
compute the income in accordance with law even in the absence of
valid return of income. Therefore we remand this matter back to the
file of the Assessing Officer for denovo assessment of capital gains in
accordance with law.
ITA Nos.754 to 756/2015 :- 16 -:
In the result, the appeal of the assessee in ITA 19. No.756/CHNY/2015 for assessment year 2007-2008 is partly allowed for statistical purpose.
To summarize the result, the appeals of the assessee in ITA Nos.754 & 755/CHNY/2015 for assessment years 2000-2001 and 2001- 2002 stand dismissed whereas ITA No.756/CHNY/2015 for assessment year 2007-2008 is partly allowed for statistical purpose.
Order pronounced on 20th day of August, 2019, at Chennai.
Sd/- Sd/- (एन.आर.एस. गणेशन) (इंटूर� रामा राव) (N.R.S. GANESAN) (INTURI RAMA RAO) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER
चे�नई/Chennai �दनांक/Dated: 20th August, 2019 KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF