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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI D.KARUNAKARA RAO, AM & SHRI VI KAS AWASTHY, JM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
There are two appeals filed by the assessee under consideration. They are filed against the separate orders of CIT(A)-2, Pune, commonly dated 16-03-2016 for the Assessment Years 2010-11 and 2011-12.
Identical grounds have been raised by the assessee. Therefore, the grounds raised for A.Y. 2010-11 are extracted here as under :
“The following grounds of appeal are taken independently and without prejudice to one another. 1. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the order of the Assessing Officer levying penalty of Rs.1,18,875/- under section 271 (1)(c) of the Income Tax Act. 2. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in holding that the assessee was liable for concealing the particulars of income.
3.(a) On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that there was no negative cash balance of Rs.3,84,719/- in the profit and loss account finally prepared, which fact is evident from the profit and loss account filed by the assessee along with its return of income.
(b) On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that the additional income of Rs.3,84,719/- offered by the assessee in answer to question no. 28 of his statement recorded on 01-11-2012 during the survey operation in respect of which the penalty has been levied, was offered on the basis of only a hurriedly' prepared provisional statement of income and expenditure that cannot be relied upon to levy the penalty under section 271 (1 )(c) of the Income Tax Act.
On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has further erred in not appreciating that the additional income of Rs.3,84,719/- offered by the assessee in answer to question no. 28 of his statement recorded on 01- 11-2012 during the survey operation was made only on the basis of the negative cash balance of Rs.3,84,719 as per the provisional income and expenditure statement prepared hurriedly during the survey operation. The additional income of Rs.3,84,719/- was not offered on the basis of any investment in land out of the undisclosed sources of income as alleged by the Assessing Officer in Para 4 on page 4 of the order dated 27-08-2014 levying the penalty under section 271 (1)(c) of the Income Tax Act and accepted as such by the CIT (A) in Para 4 on page 12 of his appellate order.
On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that penalty levied under section 271 (1)(c) of the Act in this case cannot be sustained because the assessment order passed in this case is without jurisdiction and bad in law because the penalty order is based on the reassessment notice issued under section 148 of the Income Tax Act without fulfilling the mandatory precondition of recording reasons to believe that certain income chargeable to tax has escaped assessment.
On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that while initiating the penalty by issuing notice under section 274 r.w.s. 271 (1)(c) of the Act the Assessing Officer is not sure as to for which specific charge the penalty is being initiated. He had issued the notice for either of the charges contained in section 271 (1)(c) of the Income Tax Act.
As such the consequent penalty order passed under section 271 (1)(c) of the Act levying penalty of Rs.1,18,875/- is unlawful and ab-initio void.
On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that the penalty of Rs.1,18,875/- levied by the Assessing Officer under section 271 (1)(c) of the Act is not justified for the reasons that the offer of additional income of Rs.3,84,719/- made by the Assessing Officer was subject to the condition that the penalty should not be initiated.
The appellant craves leave to delete or to modify, alter or amend any or all of the above grounds of appeal, or to add any other ground/grounds of appeal.”
Briefly stated, relevant facts are that the assessee in an individual
and is engaged in the business of sale and purchase of plots. Assessee
filed the return of income on 17-12-2012 declaring total income of
Rs.6,36,380/-.
During the proceedings before us, Ld. Counsel for the assessee
submitted that this is a case where survey action u/s.133A of the Act
was taken place on 01-11-2012. Assessee did not maintain the books
of account for the year under consideration. During the survey
proceedings, provisional books of account along with financial
statements were only prepared by the assessee. This exercise resulted
in discovery of negative cash balances of 3,84,719/- for the A.Y. 2010-
11 and Rs.24,48,861/- for the A.Y. 2011-12. On the condition that the
penalty for concealment of said negative cash balances u/s.271(1)(c) of
the Act shall not be levied by the AO, the assessee offered the said
negative cash balances as income of the assessee for the said
assessment years. Complying with the same, assessee filed the return
of income for the years under consideration and assessments have
become final on this aspect. Thus, no appeals were filed by the
assessee before the CIT(A). Subsequently, the AO initiated the penalty
proceedings for concealment of income and levied the penalty for both
the years. During the First Appellate proceedings, CIT(A) confirmed the
same. Therefore, the assessee filed the present appeals for both the
assessment years.
Elaborating the above facts, Ld. Counsel for the assessee
submitted that it is a case of breach of agreement between the assessee
and the AO and the conditions set by the assessee during the survey
action were not honoured by the AO in matters relating to levy of
penalty u/s.271(1)(c) of the Act in both the assessment years. Further,
mentioned that this is a case where the said negative cash balances
were arrived at based on the provisional cash books and financial
statements. On the negative cash balance figures, Ld. Counsel
mentioned that the said negative cash balances did not arise. Further,
on the correctness of the audited books of account/financial
statements, assessee implies that the said negative cash balance figures
are mere estimates. In that case, the addition so made by the AO on
account of negative cash balances constitutes estimation in which case,
the penalties u/s.271(1)(c) of the Act are not leviable and therefore, the
penalties related to the estimated additions are unsustainable in law for
both the assessment years.
On the other hand, Ld. DR for the Revenue submitted that this is
a case where cash balances was finally arrived at in the presence of the
departmental authorities by the assessee and the assessee did not
dispute the same by stating that the same constitutes an adhoc
estimations. The fact that the assessee declared the same in the return
of income assumes significant. Therefore, the Ld. Counsel for the
assessee cannot raise this issue on the ground of estimations and the
penalties levied by the AO and confirmed by the CIT(A) in toto for both
the assessment years are sustainable in the hands of the assessee.
We heard both the parties on this issue and perused the orders of
the Revenue. Regarding the argument relating to estimations, we find
the fact that the figures are finally arrived at by the assessee. AO also
accepted the same and therefore, the same cannot constitute
estimations. It is not the case of the assessee that correct figures are
different. Infact, the return of income does not indicate that the said
income offered by the assessee on account of negative cash balances
during survey action are mere estimations. Therefore, this part of the
argument of the Ld. Counsel for the assessee is unsustainable and
therefore, the same is dismissed.
Regarding non-adhering to the conditions set by the assessee for
offering of the additional income, we are of the opinion that the income
so declared by the assessee in the return of income is final. As such,
there is no indication specified in the return that the said returned
income is subject to the conditions on non-levy of penalty. Further, it is
not the case of the assessee that the said provisional figures so arrived
at are false and there is evidence to demonstrate the same. From these
angles also, this part of the argument of Ld. Counsel for the assessee is
also unsustainable and therefore, it is dismissed. Further, we perused
the finding given by the CIT(A) on this issue and find it relevant to
extract the same here as under :
“4.3 I have given my thoughtful consideration to the facts of the case as well as decision cited and I am unable to agree with the arguments taken on behalf of the appellant for the following reasons : i. The appellant did not file any return of income since the A.Y. 2008- 09 onwards, even though his income exceeded the maximum exemption limit. ii. The return was filed only after the survey was conducted u/s.133A of the I.T. Act. iii. The additional income was detected only due to the survey operation and if there had been no such action then the appellant would have certainly escaped the tax liability on the additional income. iv. Thus, the additional income was admitted only after the detection of the same during the survey.
v. The appellant is a well educated person and is a practicing lawyer. It was expected of him to be more law abiding particularly being in legal profession. vi. His conduct shows that he deliberately avoided to file return of income and avoided to pay tax on the income earned by him.
4.3.1 The argument that disclosure was made to buy peace and avoid litigation is also not acceptable in view of number of decisions on this issue. Where the assessee himself voluntarily concedes that a particular item of income had been concealed by him and surrenders such income for the purpose of assessment, there is nothing left for the department to
prove the factum of it being assessee’s income and also the factum of it having been concealed by him. In such cases, such concession by the assessee may afford sound foundation for the imposition of penalty. This proposition has been laid by the Hon’ble Delhi High Court in the case of Durga Timber works Vs. CIT (79 ITR 63) (Del.) and also by Hon’ble Allahabad High Court in the case of Banaras Chemical Factory Vs. CIT (108 ITR 96) (All.) . . . . . . . . . . . . . . . . . . . .
4.3.6 In the light of the aforesaid discussion on the facts, provision of sec.271(1)(c) r.w. Explanation-1 and decision cited I hold that the appellant was clearly liable for concealing the particulars of income which was detected due to survey operation u/s.133A of the I.T. Act. The admission was made by him only when the facts were duly confronted with him. Considering the fact that the appellant deliberately avoided to file return of income particularly keeping in view of the fact that he is a well educated person and a lawyer by profession, he does not deserve any leniency with regard to penalty proceeding. I therefore do not find any reason to interfere with the order of the Assessing Officer in levying penalty u/s.271(1)(c) of Rs.1,18,875/- being 100% of the tax sought to be evaded. Accordingly, the order of the Assessing Officer is confirmed.”
From the above, we are of the opinion that the order of CIT(A) is
fair and reasonable and it does not call for any interference.
Reasoning of the CIT(A) for other assessment year is also similar.
Considering the commonality of the arguments of Ld. Counsel, the
penalties levied by the AO for both the assessment years, i.e. A.Y. 2010-
11 & 2011-12 are confirmed. Accordingly, the grounds raised by the
assessee for both the assessment years are dismissed.
In the result, both the appeals of the assessee are dismissed.
Order pronounced in the open court on this 04th day of May, 2018.
Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य
पुणे Pune; �दनांक Dated : 04th May, 2018 सतीश
आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत
अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-2, Pune 4. CIT-2, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “B Bench” Pune; 5. गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार स स�यािपत �ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune