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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: SHRI S. V. MEHROTRA & SMT. BEENA A. PILLAI
The present penalty appeal has been filed by the assessee against the order dated 05.11.2015 passed by Ld. CIT(A) IX, New Delhi for the Assessment Year 2011-12 on the following grounds of appeal: “Penalty on estimated basis on Disclosed Credit Transactions:
1. Whether the Ld CIT(A)-19, New Delhi justified in confirming the concealment penalty on the income calculated on estimated basis on the disclosed credit transactions in books of accounts?
2 I.T.A.No.1046/Del/2016
Penalty on estimated basis on Voluntarily Surrendered Bank Account:
2. That on the facts and in the circumstances of case and in law, the Ld CIT(A)-19 New Delhi has failed to appreciate that surrendered bank account was not detected by A.O. during assessment at any stage, it was voluntarily surrendered by the assessee. Therefore, penalty u/s 271(l)(c) cannot be levied. 2.1 Whether the Ld CIT(A)-19, New Delhi justified in confirming the concealment penalty in spite of assessee's agreement to an addition of income on estimated basis which was far excessive than actual income earned I remaining funds in Bank account surrendered voluntarily?
Penalty for mistake of professional 3. Whether the Ld CIT(A)-19, New Delhi justified in confirming the concealment penalty because of inadvertent mistake of an accountant and disregarding the affidavit filed by the assesee's accountant?
Penalty on income calculated on estimated basis 4. Without prejudice to other grounds, whether the Ld CIT(A)-19, New Delhi was justified in confirming the concealment penalty on the income calculated on estimated basis (i.e. where the quantum of exact income is not ascertainable)?
Relief Claimed:-that the penalty u/s 271(l)(c) amounting to Rs. 7,13,200/- be deleted.”
The brief facts of the case are that the assessee is a resident individual and filed his return of income on 25.11.2011 declaring total income of Rs.14,78,840/-. The assessee is engaged in the business of trading in metal scrap under two entities being, M/s. Gulshan International (India) and M/s. Rock International (India).
3 I.T.A.No.1046/Del/2016 During the assessment proceedings, Ld. A.O. observed various discrepancies in respect of the disclosure made by the assessee in his return of income. It was observed by the A.O. that the assessee had not disclosed certain bank accounts maintained in the name of M/s. Gulshan International. He further noted that the assessee has not considered the income arose from M/s. Rock International India. Considering the discrepancies, the assessee agreed on the profits being estimated @ 6% on ad-hoc basis. During the assessment proceedings, the assessee surrendered certain amounts as well as the cash deposits which was found in the bank account. Ld. A.O. passed the assessment order by assessing the income at Rs.37,86,550/-. He initiated penalty proceedings u/s 271(1)(c) of the Act. The assessee further admitted his mistake of not including the turnover earned from Rock International India. Ld. Assessing Officer observed that the assessee did not furnish the details as required, to substantiate the bona fide mistake of not disclosing the true and correct material in the return of income. Ld. A.O. passed the penalty order by levying penalty of Rs.7,13,200/-.
Aggrieved by this order, assessee preferred appeal before Ld. CIT(A) who confirmed the penalty, as the explanation submitted by the assessee was not satisfactory and that the surrender so made by the assessee was on the basis of information unearthed by the 4 I.T.A.No.1046/Del/2016 Assessing Officer during the assessment proceedings. He thus confirmed the findings of Ld. Assessing Officer that income has escaped assessment intentionally.
Aggrieved by the order of Ld. CIT(A), the assessee is in appeal before us now.
Ground No.1: The Ld. A.R. submitted that during scrutiny proceedings, assessee suo moto offered for taxation on estimated basis profit arising from turnover in undisclosed bank account on conditional basis to buy peace and to avoid litigation.
Ground No.2: Ld. A.R. tried to put up an argument that during the assessment proceedings, the assessee had surrendered the turnover in the following undisclosed bank accounts: S.No. Bank name Account No. Type of A/c 1 ICICI Bank Ltd. 072305000201 Current 2 ICICI Bank Ltd. 072305000511 Current 3 ICICI Bank Ltd. 033001002107 Saving 6.1 Ld. A.R. submitted that the above bank accounts were never detected by the income tax department. These were surrendered voluntarily.
Ground No.3: Ld. A.R. submitted that in relation to Rock International in para 11 of assessment order, that Ld. A.O. accepted the audited results of said returned income, ergo, addition of Rs.5,69,710/- was made, being audited net profit as computed by the assessee. 7.1 Ld. A.R. submitted that while filling the Income Tax Return for the A.Y. 2011-12, Assessee's Accountant
5 I.T.A.No.1046/Del/2016 inadvertently didn't merge the income of M/s. Rock International in Income Tax Return. Ld. A.O. came to know about M/s. Rock International from CIB information. Ld. A.R. submitted that assessee was under bona-fide belief that he had disclosed all his income. Ld. A.R. submitted that assessee is an individual with village background and does not possess sufficient knowledge about Income Tax Returns. Ld. A.R. submitted that assessee reconciled all his financials, bank statements with the help of his counsel. Ld. A.R. submitted that it was at that time, the assessee realized that he didn't disclose the Income of Rs.5,69,710/- in Income Tax Return. It was also learnt that current account in M/s. Gulshan International was also not considered in the Balance sheet of M/s Gulshan International. Ld. A.R. submitted that the assessee surrendered the Income of Rs. 5,69,710/- and total credit transaction in undisclosed bank account as turnover. Ld. A.R. submitted that assessee agreed on the addition merely to buy peace and to avoid litigation. Ld. A.R. submitted that Financials of M/s. Rock International were duly audited and Ld. A.O. had accepted the audited result. It is submitted that, there was no intention of the assessee to hide/suppress this income. Ld. A.R. submitted that it was due to accountant's mistake and the accountant has accepted his mistake by filling an affidavit (placed at Pages No.31 & 32 of this paper book). Ld. CIT (A) however, discredited the 6 I.T.A.No.1046/Del/2016 Affidavit filed by the accountant by considering it to be not genuine.
Ground No.4: Ld. A.R. submitted that Ld. A.O. has calculated the income on estimate basis by applying flat rate of 6% on total credit transactions. He submitted that in total credit transactions, there are some loans and advances cash withdrawals from one bank account and deposited into another bank account, few transactions were in form of advances. By discrediting the above transactions, Ld. AD considered the total credit transaction as turnover and applied the flat rate of profit @6%. Ld. A.R. submitted that assessee had agreed on estimated addition merely to buy peace and to avoid litigation. 8.1 He submitted that the assessing officer has made additions even on disclosed items and the assessee had suo motu made declaration to buy peace from the Revenue authorities. He submitted that the failure to include the income from M/s. Rock International is a bona fide mistake. He thus requested that the penalty may be dropped.
On the contrary, Ld. D.R. submitted that the A.O. had specifically asked for the details of bank accounts held by the assessee for which the assessee had replied declaring three bank accounts as under:
S.No. Bank nam & Branch Account No. 1 HDFC Bank Ltd., Preet Vihar 15612020002527
7 I.T.A.No.1046/Del/2016
2 ICICI Bank Ltd. Preet Vihar 003705008499 3 SBI, Yamuna Vihar, Delhi 31234407486 9.1 The relevant annexure have been placed at page 3 of the compilation submitted by the Ld. D.R. The Ld. D.R. submitted that the assessee has been claiming that there was only one bank accounts that was undisclosed, out of negligence on the part of accountant. However, the letter submitted by the assessee at the time of assessment proceedings relied upon by the Ld. D.R. show that the bank accounts with HDFC Bank Ltd., ICICI Bank Ltd. and SBI, which have not been included in the Paper Book filed by the assessee before us. He further referred that at page 3 of the assessment order, where the Assessing Officer has disclosed the details revealed by Investigation wing shows that the assessee was maintaining seven bank accounts. As the chart has been reproduced at page 3 of the Assessing Officer’s order, the same is not being reproduced herein. 9.2 Ld. D.R. drew our attention to the submissions made by the assessee before the Assessing Officer vide letter dated 13.03.2014, wherein it has been submitted that the accountant forgot to consider one bank account held with ICICI Bank Ltd. in the return of income. 9.3 Ld. D.R. submits that the details submitted by the assessee at the time of assessment proceedings and the detail submitted by the assessee now vis-à-vis documents obtained from the assessment records are contrary with 8 I.T.A.No.1046/Del/2016 each other. He, thus submitted that the submissions are not bona fide and the assessee has failed to demonstrate the same by way of any material / evidence on record and thus, the assessee failed to discharge the requirement as specified under Explanation (1) and (2) to Section 271(1)(c) of the Act. 9.4 Ld. D.R. further referred to letter dated 13.03.2014 wherein the opening line says that as the accountant was held up with some litigation in his family at his native village in U.P. and that the accounts were prepared when he returned. Ld. D.R. submits that it is clear from such statements made by assessee before the Assessing Officer that the bank accounts were not maintained on day to day basis. He submitted that various opportunities were given to the assessee, to submit bank accounts, which have not been fulfilled by the assessee. Ld. D.R. referred to the affidavit submitted by the accountant, Mr. Naeem Ahmed. Ld. D.R. submitted that in the affidavit dated 20.07.2015, there are three bank accounts which have been said to be missed out by the accountant, Mr. Naeem Ahmad. Ld. D.R. submits that the assessee having such a huge turnover, has only one employee being this accountant, Mr. Naeem Ahmed, who has shown his failure before the A.O. at the time of assessment proceedings. Ld. D.R. relied upon the Annexure 3 to the compilation at page 4 filed before us.
9 I.T.A.No.1046/Del/2016 9.5 Ld. D.R. submitted that during the assessment proceedings, it was brought to the notice of assessee that income from Rock International (India) has been undisclosed. The Assessing Officer has obtained the details of Rock International India from CIB Information showing cash deposits amounting to Rs.41,00,000/- Ld. D.R. submits that the assessee has not been able to prove the cash deposits even though the accounts of Rock International (India) were audited. Ld. D.R. submits that there are contradictions in the submissions made by the assessee before the authorities below vis-à-vis this Tribunal. He submitted that the assessee has not discharged its onus and the bona fide has not been established as similar mistakes have crept in for Assessment Year 2012-13, which has been accepted by the assessee before Ld. CIT(A). The relevant observation of Ld. CIT(A) are reproduced at page 18 of his order. The Ld. D.R. thus submitted that the assessee has concealed the particulars of income and has also furnished inaccurate particulars. He further submitted that the assessee has also not discharged the onus of providing a satisfactory explanation to establish the bona fide.
We have head rival submissions and perused the material placed before us. The assessee deals in scrap and there are possibilities that the sellers could not be produced for the purpose of establishing sales / purchase of scrap. The main argument of the assessee is this that 10 I.T.A.No.1046/Del/2016 as sufficient surrender has been made by the assessee suo motu, the penalty proceedings initiated against him should be quashed. Ld. A.R. placed his reliance upon the decision in the case of CIT Vs Reliance petro Products Pvt. Ltd. reported in 322 ITR 158. 10.1 In our opinion, there is a basic fundamental difference between ignorance and bona fide mistake. In the first case, assessee cannot be excluded from the penalty proceedings as there is willful omission on behalf of the assessee in disclosing his true and correct income. Whereas, in the second case, the omission must be become as inadvertence, which can be due to human error. It cannot be ignored that human error must be tested on probabilities. No doubt that the courts are liberal when any bona fide mistake is made, but very harsh when there is a willful omission on behalf of the assessee to make full and true disclosure of its income. Penalty imposed by the Assessing Officer in such cases has been invariably upheld. 10.2 The question to be ascertained is whether the assessee has offered any explanation for concealment of particulars of income or furnishing of inaccurate particulars of income. Explanation to section 271 resorts presumption of concealment noted by the Assessing Officer who resorts to assess income. The burden is on the assessee to show otherwise by cogent and reliable evidence. When the initial onus placed by the 11 I.T.A.No.1046/Del/2016 Explanation has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constitutes the income and not otherwise. 10.3 In the facts and circumstances of the present case, the assessee has only stated that he has surrendered the additional sum with a view to avoid litigation and to buy peace of mind from the department. Such kind of explanation does not fit into the requirements laid down by Explanation (1) to Section 271(1)(c) of the Act. It is a trait law that voluntary disclosure does not relieve the assessee from the mischief of penal proceedings. The law does not provide that when the assessee makes voluntary disclosure of his concealed income, he can be absolved from penalty. 10.4 We observe that the surrender of income in case of the assessee was not voluntary as the offer of surrender was made in lieu of CIB information made available by the Assessing Officer during the assessment proceedings. It is noted that the assessee himself has contradicted his own submissions from the relevant pages relied upon by the Ld. D.R. filed in the compilation. The assessee has not maintained the books of accounts and considered all the transactions as required by the statute. That the assessee surrendered the income as he could not prove the transactions and its cash deposits. Had the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring the 12 I.T.A.No.1046/Del/2016 income including omission later during the course of assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. The Assessing Officer has categorically recorded the findings that he was satisfied that the assessee had concealed the true particulars of income and is liable for penalty proceedings u/s 271 read with Section 274 of the Act. The principles laid down by various judgements of this court as well as Hon'ble Supreme Court and Hon'ble High Court have been correctly followed by the Revenue and we find no illegality in the department’s initiation of penalty proceedings in the instant case. We, therefore fully agree with the view taken by Ld. CIT(A) and uphold his decision.
In the result, appeal filed by the assessee stands dismissed. Order pronounced in the open court on 16th June, 2016. Sd./- Sd./- (S. V. MEHROTRA) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER Date: 16th June, 2016 Sp. Copy forwarded to:- The appellant The respondent The CIT The CIT (A)-, New Delhi. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy. By Order
(ITAT, New Delhi)
13 I.T.A.No.1046/Del/2016 S.No. Details Date Initials Designation 1 Draft dictated on Sr. PS/PS 2 Draft placed before author 15/6 Sr. PS/PS Draft proposed & placed before 3 JM/AM the Second Member Draft discussed/approved by 4 AM/AM Second Member Approved Draft comes to the 16/6/16 5 Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement 6/6 Sr. PS/PS 7 File sent to Bench Clerk 16/6 Sr. PS/PS Date on which the file goes to 8 Head Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order