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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Shri M.Balaganesh, AM & Shri S.S.Viswanethra Ravi, JM]
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH : KOLKATA [Before Hon’ble Shri M.Balaganesh, AM & Shri S.S.Viswanethra Ravi, JM] I.T.A Nos. 496&497/Kol/2016 Assessment Year : 2003-04 & 2005-06 Shri Sanat Kr. Bhattacharjee -vs- ACIT, Circle-27, Haldia [PAN: ADFPB 6426 K] (Appellant) (Respondent)
For the Appellant : Shri V.N. Purohit, FCA For the Respondent : Shri Arindam Bhattacharjee, Addl. CIT
Date of Hearing : 14.11.2017 Date of Pronouncement : 22.11.2017
ORDER Per M.Balaganesh, AM
These two appeals by the Assessee arise out of the orders of the Learned Commissioner of Income Tax(Appeals)-7, Kolkata [in short the ld CIT(A)] in Appeal Nos.422&423/CIT(A)-7/Cir-27/14-15 dated 04.01.2016 and 04.02.2016 respectively against the separate order passed by the ACIT, Circle-27, Haldia [ in short the ld AO] under section 271(1)(c) of the Income Tax Act, 1961 (in short “the Act”) dated 21.03.2013 for the Assessment Years 2003-04 & 2005-06.As identical issue is involved in both the appeals, they are taken up together and disposed off by this common order for the sake of convenience.
The only issue to be decided in these appeals is as to whether the ld CITA was justified in upholding the levy of penalty u/s 271(1)(c ) of the Act in the facts and circumstances of the case. The facts of Asst Year 2003-04 are taken up adjudication
2 ITA Nos.496&497/Kol/2016 Sanat Kumar Bhattacharjee A.Yr.2003-04&2005-06 and the decision rendered thereon would apply with equal force for Asst Year 2005-06 also in view of identical facts except with variance in figures.
The brief facts of this issue is that the assessee filed his return of income for the Asst Year 2003-04 on 26.3.2004 declaring total income of Rs 4,73,230/-. The assessment was completed u/s 143(3) of the Act on 30.3.2006 determining total income of Rs 48,81,539/- which was modified to Rs 11,02,540/- vide order u/s 143(3) / 1144/251/154/254 of the Act dated 28.11.2007. Subsequently a survey u/s 133A of the Act was conducted in the various business premises of the assessee on 12.6.2009. Post survey enquiries revealed certain undisclosed properties made by the assessee in land in the district of Purba Medinipur, West Bengal. The assessee purchased landed property admeasuring 26 decimals in Bhanderberia Taluk with Door No. 900 for Rs 5,34,881/- and 2.2/7 decimals in Bhanderberia Taluk with Door No. 901 in the name of Pranab Chakraborty for Rs 53,617/- aggregating to Rs 5,88,498/-.
3.1. The assessee pursuant to the survey made a disclosure petition dated 24.8.2009 disclosing undisclosed investment in landed property amounting to Rs 5,88,498/- and paid the tax thereon including interest. The assessee in this disclosure petition mentioned that the voluntary disclosure was made in order to come clean and to avoid protracted litigation. The time limit for filing the revised return had expired and hence the assessee could not file any revised return offering this income of Rs 5,88,498/- towards investment in land. The ld AO pursuant to this disclosure, issued notice u/s 148 of the Act on 30.3.2010 i.e after seven months from filing of disclosure petition. The assessee filed a return in response to this notice u/s 148 of the Act by duly offering the additional income of Rs 5,88,498/- . The reassessment was completed u/s 143(3) / 147 of the Act on 16.12.2010 determining the total income at Rs 17,95,038/-.
3 ITA Nos.496&497/Kol/2016 Sanat Kumar Bhattacharjee A.Yr.2003-04&2005-06 3.2. In the penalty proceedings, the assessee pleaded that the mistake in not disclosing the investemtn in landed property to the tune of Rs 5,88,498/- had occurred due to inadvertence on the part of the accountant of the assessee. It was contended that the assessee had made voluntary disclosure on 24.8.2009 offering the additional income of Rs 5,88,498/- and paid the tax and interest thereon. The notice u/s 148 of the Act was issued only to regularize the disclosure made by the assessee vide petition dated 24.8.2009 since the assessee could not file any revised return for the original assessment within the meaning of section 139(5) of the Act. It was also pointed out that the landed property wsa purchased in the name of Sri Pranab Chakraborty and the assessee was under the bonafide belief that the said investment should be disclosed only by that party in his return of income and not by the assessee herein. Later on the advise of his tax consultant, the assessee came to know the omission committed by the accountant in this regard and accordingly voluntarily came forward to offer the same much before the issuance of notice u/s 148 of the Act. The ld AO later levied penalty u/s 271(1)(c ) of the Act on the said additional income offered in the sum of Rs 5,88,498/- on the ground that the same was not offered by the assessee in the original return of income and it had transpired only pursuant to the survey conducted by the department. He further observed that but for the survey , the assessee would not have come forward to make this disclosure petition dated 24.8.2009 and offering the additional income of Rs 5,88,498/- and payment of tax and interest thereon. Hence it amounts to concealment of income on the part of the assessee in the original return of income and hence eligible for penalty u/s 271(1)( c) of the Act. Accordingly he levied the penalty of Rs 1,53,878/- for the Asst Year 2003-04. The ld CITA upheld the levy of penalty u/s 271(1)( c) of the Act.
Aggrieved, the assessee is in appeal before us on the following grounds:-
4 ITA Nos.496&497/Kol/2016 Sanat Kumar Bhattacharjee A.Yr.2003-04&2005-06 1. For that on the facts and circumstances of the case the Ld. CIT(A) erred both in facts and in law in confirming the penalty of Rs. 1,53,878/- imposed u/s 271(1)(c) of the Income Tax Act, 1961 by the ACIT, Circle-27, Haldia.
The appellant craves leave to add to/ modify, amend and vary the ground of appeal at or before the date of hearing.
We have heard the rival submissions. We find that it is not in dispute that the additional income of Rs 5,88,498/- for the Asst Year 2003-04 was found / detected by the department pursuant to the survey conducted on 12.6.2009. But after the survey, since the original assessment had already been completed for the Asst Year 2003-04, the assessee could not file any revised return u/s 139(5) of the Act. Immediately within 2 months of the survey , the assessee filed a disclosure petition dated 24.8.2009 duly offering the entire undisclosed investment in landed property to the tune of Rs 5,88,498/- for the Asst Year 2003-04. Similar disclosures were also made for the Asst Years 2004-05 and 2005-06 . The taxes together with interest were duly paid for these additional incomes offered for these three years. Out of this, the department did not initiate any action for the Asst Year 2004-05. Reopening notices u/s 148 of the Act were issued only for the Asst Years 2003-04 and 2005-06 ( i.e the years under appeal) and ultimately the reassessments were completed by accepting the returns filed in response to notice u/s 148 of the Act after making minor additions, on which, no penalty has been levied by the ld AO. It is pertinent to note that even after the disclosure petition dated 24.8.2009, notice u/s 148 of the Act was issued by the revenue only on 30.3.2010 i.e after 7 months from the end of the month in which disclosure was made. The assessee had duly paid the entire taxes together with interest on the additional income offered in the disclosure petition immediately and much before the issuance of notice u/s 148 of the Act. Hence it could be safely concluded that the notice u/s 148 of the Act was issued only to regularize or give effect to the disclosure petition dated 24.8.2009 offering the additional income and accordingly there is no concealment in the 4
5 ITA Nos.496&497/Kol/2016 Sanat Kumar Bhattacharjee A.Yr.2003-04&2005-06 return of income filed by the assessee. What is available with the ld AO at the time of initiation of penalty proceedings is the return filed in response to notice u/s 148 of the Act only. In the said return, there was no concealment by the assessee. In this regard, the reliance placed by the ld AR on the co-ordinate bench decision of Bangalore Tribunal in the case of Muninaga Reddy vs ACIT in ITA No. 1488/Bang/2012 dated 14.8.2013 is well founded. The facts of that case that pursuant to the survey, the assessee declared an amount of Rs 5.26 crores and Rs 70 lacs for Asst Years 2006-07 and 2007-08 respectively. The assessee in all declared income for the Asst Year 2008- 09 a sum of Rs 1,76,94,888/-. The return of income was filed on 9.6.2010. Since it was a belated return, the same was lodged. To regularize the return filed by the assessee, a notice u/s 148 of the act was issued. The assessee through his AR by letter dated 16.9.2010 pleaded that the return filed on 9.6.2010 may be treated as a return filed in response to notice u/s 148 of the Act. Thereafter the AO referred to the survey and outcome of the survey and accepted the income declared by the assessee in the return of income. When the penalty u/s 271(1)(c ) of the Act was levied on the same, the tribunal held that when a survey is conducted by a survey team, the question of satisfaction of AO or CITA or the CIT does not arise. It further held that one has to keep in mind that it is the AO who initiates penalty proceedings and directs the payment of penalty. He cannot record any satisfaction during the course of survey. Decision to initiate penalty proceedings is taken while making assessment order. It is , thus, obvious that the expression ‘in the course of any proceedings under this Act’ cannot have the reference to survey proceedings. It necessarily follows that concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee has to be in the IT return filed by it. Since the assessee was exposed during survey, may be, it would have not disclosed the income but for the said survey. However, there cannot be any penalty only on surmises, conjectures and possibilities. Section 271(1)(c ) has to be construed strictly. Unless it is found that there is actually a concealment or non-disclosure of the particulars of income, penalty cannot be imposed. There is no 5
6 ITA Nos.496&497/Kol/2016 Sanat Kumar Bhattacharjee A.Yr.2003-04&2005-06 such concealment of non-disclosure as the assessee had made a complete disclosure in the IT return and offered the surrendered amount for the purposes of tax. It further held that the Hon’ble Delhi High Court in the case of CIT vs SAS Pharmaceuticals reported in 335 ITR 259 (Del) had endorsed this view.
5.1. We hold that the concealment of income would start only after the return was filed or subsequent to filing of belated return when the department detected certain income as escaped. The assessee’s case would not fall under Explanation 3 to section 271(1)(c ) of the Act. Reliance in this regard is placed on the following decisions :- CIT vs Arthanariswamy Chettiar (S.S.K.G.) (1982) 136 ITR 145 (Mad) – Para 5 ACIT vs RMP Infotech P Ltd (2011) 12 ITR (trib) 581 (Chennai) – Para 5 DCIT vs Dr.Satish B Gupta (2011) 135 TTJ (Ahd) 611 – Para 5 Smt.Govinda Devi vs CIT (2008) 304 ITR 340 (All) – Para 5 Patna Guinea House vs CIT (2000) 243 ITR 274 (Patna) – Para 5
5.2. We find that the co-ordinate bench of Delhi Tribunal in the case of DCWT vs Vivek Kr. Kathotia in WTA Nos. 02 to 08 / Kol / 2013 dated 15.5.2015, had held as under:-
That the concept of a voluntary return of income may be important in penalty proceedings initiated in the normal assessment proceedings u/s 143(3) or 147 of the Act but not u/s 153A of the Act. When accepted by the AO then there is no concealment of income and consequently penalty u/s 271(1)(c ) of the Act cannot be imposed. The concealment of income is to be determined with regard to the return of income in response to notice u/s 153A of the Act. Therefore, in the present circumstances and facts of the case once the returned wealth is accepted by the AO u/s 153A of the Act then there cannot be a case of concealment of income or furnishing inaccurate particulars of income. In the circumstances and facts of the case the decision in the case of Prem Arora vs DCIT (24 taxmann.com 260) (Delhi Tribunal) is squarely applicable in the present case, since in the present case the assessee has disclosed gold and diamond in the statement recorded u/s 132(4) of the Act during the search operation itself, in the wealth tax return the Tribunal has approved the findings in quantum with regard to the genuineness of the declaration of gold and diamonds. Accordingly the assessee is not liable to have penalty u/s 271(1)(c ) of the Act.
7 ITA Nos.496&497/Kol/2016 Sanat Kumar Bhattacharjee A.Yr.2003-04&2005-06 (Underlining provided by us)
5.3. We also place reliance on the Third Member decision of the co-ordinate bench of Delhi Tribunal in the case of Addl CIT vs Prem Chand Garg reported in (2009) 31 SOT 97 (Delhi) (TM ) dated 11.5.2009, wherein it was held that :-
The fact , whether there is concealment of income or whether inaccurate particulars thereof have been furnished is essentially a question of fact. To find out that or to decide which, all the attending circumstances have to be taken into account. The question is at what point of time this material fact is to be found out. Generally it is with reference to the return of income and at that time it is to be seen whether there was concealment of income from or furnishing of inaccurate particulars thereof in the return of income chargeable to tax. But there may be cases, where an income is not declared in the return or the particulars of income shown inaccurately in the return but assessee on realization of mistake, omission or misdeed rectifies that and correct himself and cleans his breast, can he still be accused of concealment though in the return there has been the omission? By the time the Assessing Officer takes up the issue and comes across the information in his possession, if the assessee makes up the deficiency and offers the income or furnishes accurate particulars he, in our opinion, cannot be held guilty of concealment of income or furnishing of inaccurate particulars of his income. Any action rectified relates back to original act and to the date and time of filing the return. When the Assessing Officer starts scrutiny of the return and initiate assessment proceedings there is nothing concealed and the inaccuracy, if any, disappeared. Therefore the assessee cannot be held guilty of concealment. 20. A perusal of the provision of Section 271(1)(c ) read with Explanation 1 clearly show that it is in the course of any proceedings under the Act, assessment proceedings in this case, that the Assessing Officer is to be satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income . It is thus to be judged at this stage and if at this stage he has declared the correct income and / or furnished accurate particulars of his income then there is no scope, in our opinion, to arrive at the satisfaction by the Assessing Officer because at that stage there is no such concealment. It disappeared by an action of the Assessing Officer. In this case the assessee has no doubt did not show the amounts received as alleged gifts as his income,but no details of loans are given in the return nor any other particulars thereof given by the assessee at that stage, not to speak of inaccurate one. When the assessment was taken up and a general enquiry was made by the Assessing Officer requiring him to furnish details of any loans / gifts, if any, the assessee offered the amounts received as alleged gifts as his income and before it could be detection by the Assessing Officer. There was thus no concealment of the particulars of his income nor there remained furnishing of any inaccurate particulars of his income. It vanished before it could be detected. 7
8 ITA Nos.496&497/Kol/2016 Sanat Kumar Bhattacharjee A.Yr.2003-04&2005-06
The correct and accurate disclosure may be by filing the revised return or by furnishing the particulars of such income before the detection by the Assessing Officer. The mere fact that the assessee had not revised the returns or that the offer was by letter to avoid harassment to the assessee and the donors who were non-resident persons, it cannot convert an offer to tax as concealment of income. Therefore, in my opinion the assessee has not furnished inaccurate particulars of the income in the returns.
Therefore, mere omission of the surrendered income from the return of an item of receipt does neither amount to concealment nor furnishing of inaccurate particulars of income unless and until there is some evidence to show exist or some circumstances found from which it can be gathered that the omission was attributable to an intention or a desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. Apart from the surrender there was nothing more on record to hold the assessee guilty of offering the said amount on detection of the concealment. Even in assessment order there is nothing of that sort. In the assessment proceedings the Assessing Officer has raised some specific question not based upon information in the possession of the revenue. These are :
“Sr.No. 4 – Bank statement of all bank accounts maintained by you individually or Jointly with any other person during the financial year along with Narration of each debit / credit entry.
Sr.No. 9 – Cash flow statement for the financial year under consideration.
Sr.No.10-Had you taken / given any loan / gift during the financial year under Consideration ? If yes, please furnish details.”
On a perusal of the questionnaire, it is evident is general in nature without specifying the names of the donor or any other such details on the basis which it could be presumed that the Assessing Officer had information to call for specific information. The query “Had you taken / given any loan / gift during the financial year under consideration ?” itself suggests that the revenue was not sure enough whether any gift was there. Mere asking of a question or simply raising of an enquiry without anything further does not tantamount to detection of concealment. There was neither any detection, nor any information in the possession of the revenue, nor the manner of its communication to the assessee which might lead to a detection of concealment.
There was no specific provocation or an apprehension of detection prevailing at the time when the offer was made and in the absence of any such imminent fear from the side of the revenue, if the assessee came forward and paid the tax thereon by adding the same in the returned income, it has to be taken as a voluntary offer to tax. On the face of the evidence in the shape of confirmation letters, bank accounts, passport etc., in the hands of the assessee, it might be valid gift that would have convinced a reasonably minded person, specially a person exercising a judicial function. The accepted position
9 ITA Nos.496&497/Kol/2016 Sanat Kumar Bhattacharjee A.Yr.2003-04&2005-06 of law is that merely because an assessee had agreed to the assessment that cannot bring in automatic levy of penalty. 25. The facts and circumstances and the merits of the case and the cogent evidences placed on record are such as to exonerate the assessee from concealment penalty. The CIT(A) in my opinion is right in deleting the penalty, his order is affirmed and the appeals of the revenue are dismissed.
5.4. We find that this Delhi Tribunal decision (i.e Prem Chand Garg case) has been considered and approved by the Jurisdictional High Court in the case of CIT vs Ramesh Chand Goyal in G.A.No. 2347 of 2010 in ITAT No. 181 of 2010 dated 11.8.2010 while adjudicating the impugned issue.
5.5. In view of the aforesaid findings in the facts and circumstances of the case and respectfully following the various judicial precedents relied upon hereinabove, we hold that the order of the ld CITA upholding the levy of penalty is not sustainable in law. Accordingly, the grounds raised by the assessee for Asst Years 2003-04 and 2005-06 are allowed.
In the result, the appeals of the assessee are allowed.
Order pronounced in the Court on 22.11.2017
Sd/- Sd/- [S.S. Viswanethra Ravi] [ M.Balaganesh ] Judicial Member Accountant Member
Dated : 22.11.2017 SB, Sr. PS
10 ITA Nos.496&497/Kol/2016 Sanat Kumar Bhattacharjee A.Yr.2003-04&2005-06 Copy of the order forwarded to: 1. Shri Sanat Kumar Bhattacharjee, C/o, A.Kayes & Co., Chartered Accountants, 231, Kamalalaya Centre, 156A, Lenin Sarani, Kolkata-700013 2. ACIT, Circle-27, Haldia, Khanjan Chowk, Haldia, East Midnapur-721602. 3..C.I.T.- 4. C.I.T.- Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.