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Income Tax Appellate Tribunal, MUMBAI BENCH “L”, MUMBAI
Before: SHRI G.S. PANNU & SHRI JOGINDER SINGH
PER G.S. PANNU, AM :
In the captioned three appeals which relate to the same assessee for Assessment Year 2007-08, the core issue is the penalty levied by the Assessing Officer u/s 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’) amounting to Rs.1,17,82,234/-.
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The brief background of the manner in which the three appeals, pertaining to the same issue, have come-up can be summarized as follows. The assessee is an individual who is a non-resident so far as the assessment year under consideration is concerned. For Assessment Year 2007-08, he filed a return of income on 31.7.2007 declaring a total income of Rs.8,31,287/-. Thereafter, the assessee revised his income and further offered an income of Rs.1,76,68,508/-. Thereafter, a notice u/s 148 of the Act was issued on 29.3.2012 as a consequence of which assessment was finalized u/s 143(3) r.w.s 147 of the Act dated 21.3.2013 wherein the total income was assessed at Rs.1,85,69,800/-, which was exactly the same as was declared by the assessee originally plus the income revised subsequently. Subsequently, the Assessing Officer held the assessee guilty of concealment of income within the meaning of Sec. 271(1)(c) of the Act and levied penalty @ 200% of the tax sought to be evaded on the amount of income of Rs.1,76,68,508/-, which was declared subsequent to the filing of original return of income, and as a consequence penalty of Rs.1,17,82,234/- has been levied.
3. The assessee carried the matter in appeal before the CIT(A) who vide his order dated 26.3.2014 deleted the entire penalty levied by the Assessing Officer on the ground that the assessee had suo motu and voluntarily offered the additional income to tax; and, that the income which was offered for tax by the assessee in the revised returns of income was in any case not chargeable to tax in India. Against such a decision of the CIT(A) deleting the levy of penalty, Revenue is in appeal
3 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 before us vide contending that the penalty has been wrongly deleted by the CIT(A).
4. Subsequent to his order dated 26.3.2014, CIT(A) issued a notice u/s 154 of the Act on 10.11.2014 requiring the assessee to show-cause as to why the earlier order passed by him on 26.3.2014 be not be amended as it was passed without taking note of the fact that the assessee had made a supplementary Affidavit declaring additional income of Rs.1,03,49,908/- which was not voluntary because of the issue of summons dated 29.9.2011 by the ADIT (Inv.), Unit-II(3), Mumbai u/s 131 of the Act. In pursuance to such notice of CIT(A), assessee made submissions explaining why no penalty could be levied in this case u/s 271(1)(c) of the Act and also the fact that the proposed action by the CIT(A) was not maintainable within the scope and ambit of Sec. 154 of the Act. The CIT(A), however, did not agree with the stand of assessee and instead passed an order on 8.12.2014 amending his earlier order and upholding the levy of penalty to the extent it related to the additional income of Rs.1,03,49,908/- disclosed by the assessee in his second revisional declaration. Against such a decision of CIT(A), assessee has filed an appeal by way of Revenue has also filed a cross-appeal vide whereby the action of CIT(A) in sustaining penalty in relation to the additional income of Rs.73,18,600/- declared in the first revised declaration has been deleted.
In this manner, it is quite evident that in the three captioned proceedings the pertinent issue, which is required to be adjudicated is 4 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 the efficacy of the action of Assessing Officer in levying penalty of Rs.1,17,82,234/- u/s 271(1)(c) of the Act. In this background, the rival counsels have made their respective submissions and the relevant material has also been perused in order to dispose of the captioned appeals.
Before proceeding further, it would be appropriate to briefly touch upon the income of Rs.1,76,68,508/- assessed in the hands of assessee, and in relation to which penalty u/s 271(1)(c) of the Act has been imposed by the Assessing Officer. Pertinently, as noted earlier, the assessee is a non-resident Indian during the year under consideration. Assessee was a resident of India upto previous year relevant to Assessment Year 1999-2000 and thereafter on account of taking-up employment, he shifted abroad since the previous year relevant to Assessment Year 2000-01 onwards. It has also been noted by the lower authorities that assessee was carrying on consultancy in the field of international trade and in December, 2001 he took up employment with a U.S company and was resident of USA till November, 2008. It is also pointed out that assessee has been a non- resident for the period commencing from Assessment Year 2000-01 and continues to be a non-resident even for the year under consideration, on which there is no dispute. For Assessment Year 2007-08 he filed a return of income originally on 31.7.2007 declaring a total income of Rs.8,31,287/- and paying due tax thereon. It transpires that assessee was a beneficial owner of a company, viz. Jonah Worldwide Limited (in short ‘the company’) and beneficiary of a foundation, viz. Selinos Foundation (in short ‘the trust’), both set-up in Mauritius in 2003. Both
5 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 the said entities are non-residents in as far as it is relevant for the purposes of the Act and do not have any source of income in India. It has been explained that somewhere in 2011 due to his ill-health, assessee decided to settle in India for the balance part of his life and on the advice of his C.A, and with a view to buy peace of mind and to avoid litigation, assessee offered to get the funds lying in the bank account held by the company and the trust with HSBC Bank, Zurich assessed in his own assessment. Accordingly, assessee made an Affidavit dated 7.9.2011 and offered to tax a sum of Rs.73,18,600/- being the peak balance lying in the bank accounts of the said two concerns, and for this purpose the assessee filed a revised return on 20.9.2011. Subsequently, on 7.11.2011 assessee realised that he had committed a mistake in calculating the peak balance lying in the bank accounts held by the above stated two concerns with HSBC Bank, Zurich; and, he made a supplementary Affidavit offering to tax additional income of Rs.1,03,49,908/-. Thus, consequent to the filing of the second revised return on 15.11.2011, the total additional income of Rs.1,76,68,508/- on account of the funds lying in the bank accounts held by the company and the trust with HSBC Bank, Zurich stood declared. With a view to regularising the said revised return, the Assessing Officer issued notice u/s 148 of the Act dated 29.3.2012. The Assessing Officer finalised the assessment u/s 143 r.w.s 147 of the Act dated 21.3.2012 by accepting the income as per the revised return without making any further addition or raising any fresh tax demand. Even the additional income assessed at Rs.1,76,68,508/- was exactly the same as returned by the assessee in the revised returns.
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In this background, the Assessing Officer passed an order u/s 271(1)(c) of the Act holding the assessee guilty for two reasons. Firstly, as per the Assessing Officer, the assessment order showed that certain information called for by the Assessing Officer in the course of the assessment proceedings was not furnished by the assessee. Secondly, the Assessing Officer observed that the revised returns filed by the assessee were only because summon was issued by the ADIT (Inv.), Unit-II(3), Mumbai. Accordingly, the Assessing Officer held that assessee has concealed his taxable income by filing inaccurate particulars of income deliberately, thus levying penalty of Rs.1,17,82,234/- u/s 271(1)(c) of the Act.
8. Before us, the learned representative for the assessee has pointed out that there was no justification for levy of penalty in the present case because the entire income has been suo motu and voluntarily offered by the assessee and there cannot be any concealment or furnishing of inaccurate particulars made out against the assessee. With regard to the aspect of issue of summon by ADIT (Inv.), Unit-II(3), Mumbai, the learned representative pointed out that such summon was dated 29.9.2011 requiring the assessee to appear on 4.10.2011, a copy of such notice has been placed in the Paper Book at page 34. It has been explained that the said notice was received by the assessee only on 4.10.2011, therefore, no appearance could be made on that date, but on 5.10.2011 itself an application for adjournment was moved by the representative on behalf of assessee since at the relevant point of time assessee was in USA. Thus, the hearing stood
7 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 adjourned to 19.10.2011. It has been stated at bar that even on 9.10.2011 no hearing took place as the ADIT (Inv.), Unit-II(3), Mumbai was not available. The aforesaid aspect was explained to emphasise that the first revised return filed on 20.9.2011 was, in any case, before the issuance of summon by ADIT (Inv.), Unit-II(3), Mumbai and even the offering of the second additional income by way of supplementary Affidavit on 7.11.2011 (followed up by filing second revised return on 15.11.2011) took place before any hearing had taken place before the ADIT (Inv.), Unit-II(3), Mumbai. It was, therefore, contended that factually speaking also, the additional income was voluntarily and suo motu offered for tax without any detection by the Department. It has also been emphasised that the said income has been assessed to tax by the Assessing Officer without any further addition. Secondly, it is sought to be pointed out that the two concerns, namely, Jonah Worldwide Limited and Selinos Foundation were non-residents during the relevant period and the funds lying in the bank accounts held by the said two concerns with HSBC Bank, Zurich were not liable to tax in India and, therefore, de hors the suo motu declaration of income by the assessee in his own hands, such income was, in any case, not liable to be taxed in India. In sum and substance, the learned representative for the assessee has defended the findings of CIT(A) contained in his order dated 26.3.2014 wherein the entire penalty has been deleted.
9. Even with regard to the subsequent order of CIT(A) dated 8.12.2014, wherein the penalty has been partly upheld with regard to the additional income declared in the supplementary Affidavit dated
8 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 7.11.2011, the learned representative explained that the CIT(A) is wrong in contending that the said declaration was not voluntary inasmuch as factually the said declaration was made before any hearing could take place before the ADIT (Inv.), Unit-II(3), Mumbai. The learned representative also emphasised that the second Affidavit dated 7.11.2011 was necessitated on account of the fact that there was an error in working out the peak balance in the bank accounts held by the said two concerns, but the relevant circumstances for offering the additional income remained the same, which formed part of the first revised return filed on 7.9.2011, which was admittedly before even the issue of summon by the ADIT (Inv.), Unit-II(3), Mumbai. It has been contended that the Revenue had no information of any undisclosed income in the hands of the assessee, except the declarations made by the assessee. The learned representative for the assessee pointed out that the CIT(A) has erred in invoking Sec. 154 of the Act to partly amend his order dated 26.3.2014 because the fact of second Affidavit having been made on 7.11.2011 was very much before him. It was pointed out that the reasoning prevailing with the CIT(A) to delete the levy of penalty with respect to the additional income offered on 7.9.2011 continues to operate fully even with regard to the second declaration. It was pointed out that, in any case, the issue as to whether CIT(A) could partly uphold the penalty to the extent of income declared in the second Affidavit in view of the reasons prevailing with him to delete the penalty with regard to the first declaration was a debatable issue on which two views are possible and, therefore, the order of CIT(A) dated 26.3.2014 deleting the entire penalty could not have been amended by invoking Sec. 154 of the Act.
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On the other hand, the ld. DR appearing for the Revenue has vehemently defended the order of Assessing Officer levying the penalty u/s 271(1)(c) of the Act. The ld. DR pointed out that the assessee had not divulged the entire modus operandi of having declared the funds lying in the bank accounts of the said two concerns for tax and, therefore, the source or the actual quantum of the financial transactions could not be verified. The ld. DR also pointed out that the additional income offered by the assessee was accepted as such in the assessment proceedings because the assessee did not furnish the details or evidence as called for by the Assessing Officer. The ld. DR pointed out that even the working of the aggregate peak balance contained in the bank accounts of the said two concerns, as worked out by the assessee, could not be verified in the absence of the relevant details. In this manner, the ld. DR argued that as assessee had not offered his correct position with respect to the taxable income despite inquiries by the Department, therefore, invoking of Sec. 271(1)(c) of the Act in order to levy penalty thereon is justified in the present case.
We have carefully considered the rival submissions. Sec.271(1)(c) of the Act prescribes for levy of penalty in cases where the Assessing Officer in the course of any proceedings under this Act is satisfied that any person has either concealed the particulars of his income or furnished inaccurate particulars of such income. Quite clearly, penalty u/s 271(1)(c) of the Act is attracted only on satisfaction of either of the situations contained therein, namely, that the assessee has concealed the particulars of his income or assessee has furnished inaccurate
10 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 particulars of such income. In the present case, the assessee had declared an income of Rs.1,76,68,508/- as additional income in the revised returns of income, which has been accepted as such in the assessment finalised by the Assessing Officer u/s 143(3) r.w.s. 147 of the Act on 21.3.2013. So however, the Assessing Officer has found it appropriate to levy penalty u/s 271(1)(c) of the Act in the present case even when there is no difference between the returned and the assessed income. In the assessment order dated 21.3.2013 while initiating the penalty proceedings, the Assessing Officer has noted that assessee filed the revised petition and revised return only after the summon was issued by ADIT (Inv.), Unit-II(3), Mumbai dated 29.9.2011. Similarly, in the penalty order dated 30.9.2013 this aspect has been noted by the Assessing Officer and accordingly it is canvassed that the assessee had no intention of otherwise disclosing the additional income. Further, in the penalty order the Assessing Officer has noted that assessee was called upon to furnish the bank statements of the two entities, which were not submitted by the assessee. For this reason, the Assessing Officer has inferred that “assessee has not offered his correct position with respect to his taxable income”. The Assessing Officer also observed that failure of assessee to comply with the notice issued during the course of assessment proceedings and absence of working of the aggregate peak credit balance of the bank accounts of the aforesaid two concerns declared by the assessee would justify the levy of penalty.
12. Insofar as the filing of revised returns and the revised computation of income by the assessee are concerned, the relevant
11 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 facts which emerge from the material on record are as follows. The original return was filed by the assessee on 31.7.2007. Pursuant to the Affidavit dated 7.9.2011, assessee furnished a revised return of income offering to tax an amount of Rs.73,18,600/-. Secondly, in pursuance to the Affidavit dated 7.11.2011 assessee filed second revised return declaring a further income of Rs.1,03,49,908/- thereby disclosing total additional income of Rs.1,76,68,508/-. The respective taxes and interest thereon was also paid by the assessee. Now, the summon by ADIT (Inv.), Unit-II(3), Mumbai, which has been referred by the Assessing Officer, is dated 29.9.2011, a copy of which has been placed at page 34 of the Paper Book. In the said summon, assessee has been called upon to attend personally or through an authorised representative on 4.10.2011 alongwith the bank statement of the said two concerns, viz. Jonah Worldwide Limited and Selinos Foundation for the period 1.4.2005 to 31.3.2011. The assessee explained that the said summon was received on 4.10.2011 and, therefore, no appearance could be put before the ADIT (Inv.), Unit-II(3), Mumbai on the said date. On 5.10.2011, representative of the assessee appeared and sought adjournment on the plea that assessee was in USA and expected to return only in the beginning of December, 2011. A copy of the said communication has also been placed at page 35 of the Paper Book and it is explained that the matter stood adjourned to 19.10.2011. At the time of hearing, the learned representative for the assessee pointed out that no hearing took place on 19.10.2011 or on any other date and this aspect has been pointed out even before the lower authorities. The learned representative pointed out that under these circumstances it could not be said that the additional income was offered by the 12 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 assessee only after the summon was issued by ADIT (Inv.), Unit-II(3), Mumbai. Factually speaking, insofar as the filing of first revised return based on the Affidavit dated 7.9.2011 is concerned (return filed on 20.9.2011), the same is obviously prior to the summon issued by ADIT (Inv.), Unit-II(3), Mumbai on 29.9.2011. Before proceeding further, we deem it appropriate to briefly cull out the contents of the Affidavit by way of which the additional income has been offered to tax, which would bring out the relevant circumstances. The relevant extract is as under :-
“1. That I have been a Resident Indian till assessment year 1999-00 within the meaning of Income-tax Act, 1961 and assessed to income- tax in India under Permanent Account Number (PAN) AFDPB1445G.
2. That I became a Non Resident Indian since the year 1999 when I took up an employment in Dubai. While I was in Dubai, simultaneously, I was also carrying on business of consultancy in the field of Iron and steel international trade.
3. That for the purpose of managing my personal funds/investments, I set up a company viz., Jonah Worldwide Ltd in Mauritius ("the said Company") in the year 2003 and a Foundation called Selinos Foundation ("the said Foundation") in Liechtenstein.
4. That in and around December 2001 I took up an employment visa H1 B in a US Company and I shifted my residence to USA.
5. That I was resident holding H1B visa of USA till November 2008.
6. That I took up employment permit with Transdat Pte Ltd, Singapore in the year 2007 till November 2009.
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7. That the said Company and the Foundation each opened bank accounts with Hong Kong and Shanghai Banking Corp. (HSBC), Zurich ("the said Bank accounts") .
That in the year 2006/2007, the peak amount lying to the credit of the said bank account of the said Company was US $150,039.44 as on February 2007 and the peak amount lying to the credit of the said bank account of Selinos Foundation was US $ 8,089.85 as on October 2006.
That I returned to India in the year FY 2009 as I was suffering from heart ailment. I was diagnosed with blockages and I underwent angioplasty at Camballa Hill Hospital in Mumbai in December 2008.
10. That thereafter I kept on going to various countries on short overseas trips.
11. That I am a heart patient and required some guardian to take care of my interest and my family in an unfortunate eventuality, I, therefore, appointed my brother Mr. Dhananjay Pritamlal Bhatt who is resident Indian as the caretaker. However, my brother Mr. Dhananjay Pritamlal Bhatt's name was erroneously shown in the bank accounts as 'beneficial owner' of the said Company and the said foundation.
That I did not realize of this inadvertent mistake till recently when the bank informed me about the stolen information pertaining to the said account and that in the said stolen information my brother Mr. Dhananjay Pritamlal Bhatt's name appeared as 'beneficial owner' of the Company/Foundation.
13. That I wish to state and solemnly reaffirm that I am and I have always been the sole -real and beneficial- owner of the all the shares issued by the said Company and all its assets/investments including said bank accounts and that I am and I have always been the sole beneficiary under the said Foundation and all its assets/investments
14 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 including said bank accounts and all the-income of the said Company and the said Foundation solely belong to me and to no one else.
14. That I further state and affirm that all the instructions for the operation of the said bank accounts have solely been given by me at my behest, and that my brother Mr. Dhananjay Pritamlal Bhatt has never given any instruction for the operation of the said bank accounts.
15. That my brother Mr. Dhananjay Pritamlal Bhatt has never been in receipt of any benefits neither from the said Company nor from the said Foundation, nor from the said bank accounts. I am and I have always been the sole beneficiary and owner of the said bank accounts / Company and Foundation.
That I submit that the income of the said Company and the said Foundation is not taxable in India as the said Company and the said Foundation were not resident in India for all these years within the meaning of Income Tax Act, 1961 as during all these years the control and management of Company's and Foundation's affairs was not wholly situated in India.
17. Without prejudice to the above, to buy peace I am, suo-moto and voluntarily, offering USD 159,100 (US dollars one lakh fifty nine thousand one hundred only) equivalent to Rs.73,18,600 (Rupees Seventy three Lacs eighteen Thousand six hundred Only) as my income for the financial year ended 31st March, 2007 relevant to Assessment Year 2007-2008, being the aggregate peak balances in above bank accounts.
That I am offering to pay taxes of Rs. 24,63,441 (Rupees Twenty Four Lacs Sixty Three Thousand Four Hundred and Forty One Only) on the said income and the interest of Rs. 11,25,792 (Rupees Eleven Lacs Twenty Five Thousand Seven Hundred and Ninety Two Only) aggregating to Rs. 35,89,233 (Rupees Thirty Five Lacs Eighty Nine
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Thousand Two Hundred Thirty Three Only) on the above income suo- moto and voluntarily offered by me.”
Similarly, the supplementary Affidavit dated 7.11.2011 is also on similar lines wherein the only aspect is that the quantification of the additional income made in the earlier Affidavit dated 7.9.2011 based on the peak credit lying in the bank accounts of the said two concerns was wrong and, therefore, the error was corrected and further additional income was offered. The relevant contents of the Affidavit dated 7.11.2011 are as under :-
“2. That vide affidavit dated September 7th, 2011, I have, in order to buy peace, voluntarily and suo moto offered US $ 1,59,100 (US Dollars One Lac, Fifty Nine Thousand and One Hundred only) equivalent to Rs. 73,18,600 (Rupees Seventy Three Lacs, Eighteen Thousand and Six Hundred only) as my additional income for Financial Year ended 31st March 2007 relevant to Assessment Year 2007-08 and I have also paid on 16th September 2011 taxes of Rs. 24,63,442 (Rupees Twenty Four Lacs, Sixty Three Thousand, Four Hundred and Forty Two only) and the interest thereon of Rs.14,20,051 (Rupees Fourteen Lacs, Twenty Thousand and Fifty One only), aggregating to Rs. 38,83,494 (Rupees Thirty Eight Lacs, Eighty Three Thousand, Four Hundred and Ninety Four only) on the additional income so offered.
That in order to buy peace I am further, suo-moto and voluntarily, offering additional income of USD 224,998 (US dollars Two Lacs, Twenty Four Thousand, Nine Hundred and Ninety Eight Only) equivalent to Rs. 1,03,49,908 (Rupees One Crore, Three Lacs, Forty Nine Thousand, Nine Hundred and Eighty Only) for the financial year ended 31st March, 2007 relevant to Assessment Year 2007-2008 and paying further additional taxes of Rs. 34,47,170 (Rupees Thirty Four Lacs, Forty Seven Thousand, One Hundred and Seventy Only) and 16 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015
the interest thereon of Rs. 20,99,122 (Rupees Twenty Lacs, Ninety Nine Thousand, One Hundred and Twenty Two Only) aggregating to Rs. 55,46,291 (Rupees Fifty Five Lacs, Forty Six Thousand Two Hundred and Ninety One Only) on the above additional income, so offered for the Financial Year ended 31st March 2007 relevant to Assessment Year 2007-08.
That the above mentioned additional income has been offered on account error in calculating aggregate peak balances of Hong Kong and Shanghai Banking Corp (HSBC), Zurich ("the said Bank accounts") for the year 2006/2007 pertaining to Jonah Worldwide Ltd, Mauritius (“the said Company") and Selinos Foundation, Liechtenstein (“the said Foundation") in the original affidavit dated September 7th, 2011.”
A perusal of the supplementary Affidavit dated 7.11.2011 reveals that the reasons for which the income has been voluntarily offered for tax remains the same as was canvassed in the Affidavit dated 7.9.2011, albeit, the only difference being in the computation of such additional income. The assessee had explained in the Affidavits the reason which prevailed with him to offer the funds lying in the bank accounts of the said two concerns to tax. None of the reasons canvassed by the assessee have been found to be erroneous or false. One aspect canvassed in the Affidavit which remains uncontroverted is to the effect that the two concerns in question were non-residents in India for all the years and, therefore, their incomes were not taxable in India. It has also been averred that the two concerns were not taxable because all these years the control and management of their affairs was not wholly situated in India. None of these aspects have been established to be false or otherwise not tenable by the Assessing Officer at any stage.
17 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 The only aspect being brought out by the Assessing Officer is that the assessee has not furnished the bank statements of the two entities and also the state of affairs mentioned in the Affidavit regarding the brother of the assessee having been appointed as caretaker and whose name was erroneously mentioned as the beneficial owner has also not been explained. In our considered opinion, the aforesaid aspects may have remained inconclusive, so however, it does not distract from the fact that the impugned income has been offered to tax by the assessee voluntarily and the Revenue does not have any evidence in its possession to repudiate either the quantum or nature of the income as declared by the assessee. It is also clear that mere absence of certain particulars would not amount to furnishing of inaccurate particulars within the meaning of Sec. 271(1)(c) of the Act unless it is established by the Revenue that the particulars filed by assessee are either false or not the truth, especially considering a situation where the income has been suo motu offered to tax by the assessee. Therefore, the stand of Assessing Officer to the effect that there has been non-compliance by the assessee during the assessment proceedings with regard to furnishing of information, etc. has no bearing so far as the efficacy of the levy of penalty u/s 271(1)(c) of the Act is concerned, which is not only a separate but also an independent proceedings as held by the Hon'ble Supreme Court in the case of Anantharam Veerasingaiah and Co. vs CIT, 123 ITR 457 (SC). In fact, non-furnishing of the required information by the assessee in the assessment proceedings has not distracted the Assessing Officer from assessing the impugned income and, therefore, in the penalty proceedings it was for the Assessing Officer to establish that the particulars of income filed by the assessee
18 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 were either untrue or false. There is no such material whereby it can be inferred that the Assessing Officer has discharged such onus.
Even the charge made by the Assessing Officer that the income has been offered only after issuance of summon by ADIT (Inv.), Unit- II(3), Mumbai is also misplaced. Firstly, we have seen that the summon was issued by ADIT (Inv.), Unit-II(3), Mumbai only on 29.9.2011 by which date assessee had already filed first revised return of income declaring additional income of Rs.73,18,600/- on account of peak credit of the bank accounts with respect to the said concerns. Though the second revised return, filed on the basis of Affidavit dated 7.11.2011, is subsequent to the date of issue of summon by ADIT (Inv.), Unit-II(3), Mumbai, yet the declaration in the second Affidavit only pertains to working out of additional income, genesis of which was already there in the first Affidavit filed alongwith the revised return filed on 20.9.2011. Therefore, in sum and substance, the second Affidavit is merely correcting a mathematical error and not bringing out any new source of income. The Revenue has also not assailed the consistent averments by the assessee before us that no hearing took place in pursuance of the summon issued by ADIT (Inv.), Unit-II(3), Mumbai dated 29.9.2011 and, therefore, substantively speaking it cannot be said that the second revised return was filed after any detection of undisclosed income by the Department. Therefore, on this aspect also, we find no force in the stand of the Revenue.
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16. Another aspect of the controversy is to the effect that assessee has explained that the funds lying in the bank accounts held by the said concerns could, in any case, not be taxed in the hands of the Assessee and that it was only the suo motu action of assessee for which such income has been assessed in the hands of the assessee. Notably, both the said concerns were non-residents during the relevant period, an aspect not disputed by the Revenue also. In the hands of a non- resident only such income which has either accrued or arisen or received in India or deemed to accrue, arise or received in India could only be brought to tax. At no stage it has been the case of Revenue that the funds lying in the bank accounts held by the said concerns with HSBC Bank, Zurich fulfilled the aforesaid requirements so as to bring the same to tax in India. Considering this aspect, in our considered opinion, the levy of penalty u/s 271(1)(c) of the Act is not justified inasmuch as the assessee had voluntarily and suo motu offered the additional income to tax; that the circumstances and the explanation rendered by the assessee for declaring the said additional income have not been found to be false or untrue; and, that in any case, such incomes were not otherwise taxable in India but for the declaration made by the assessee suo motu. For all the said reasons, we find that the assessee does not deserve to be visited with the liability of penalty u/s 271(1)(c) of the Act of Rs.1,17,82,234/-.
Before parting, we may refer to the judgment of the Hon'ble Bombay High Court in the case of Vadilal Ichhachand, 32 ITR 569 (Bom.) which has been relied by the ld. DR before us for the proposition that penalty in the present case is justified because if the income declared in 20 Shri Ashutosh P. Bhatt 1104 & 1526/Mum/2015 the original return of income was accepted, it would have led to concealment of income. We have carefully perused the said judgment and find that the same is inapplicable to the facts of the present case. Firstly, the pertinent issue before the Hon'ble High Court was with regard to the basis of calculation of penalty as to whether it is to be calculated on the basis of original return or the revised return. Secondly, and more pertinently, in the present case the original return of income was not a subject matter of scrutiny assessment by the Assessing Officer at any stage and, in fact, the impugned assessment was taken up by Assessing Officer by issuance of notice u/s 148 of the Act, and that too after the revised returns of income had been filed by the assessee. Therefore, in this view of the matter, the judgment of the Hon'ble Bombay High Court in the case of Vadilal Ichhachand (supra) does not help the case of Revenue in the present case. In the result, we hereby uphold the plea of assessee and Revenue fails.
18. In view of the aforesaid discussion, we find no reasons to interfere with the ultimate conclusion of CIT(A) in his order dated 26.3.2014 and accordingly the appeal of Revenue in is dismissed. Similarly, having regard to the discussion in the foregoing paragraphs, we find that the CIT(A) misdirected himself in invoking the provisions of Sec. 154 of the Act and amending his order dated 26.3.2014. Thus, the appeal of assessee in Revenue in ITA No. 1104/Mum/2015 arising from the order of CIT(A) dated 8.12.2014 is dismissed.
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Resultantly, whereas the appeals of the Revenue are dismissed, that of the assessee is allowed.
Order pronounced in the open court on 23rd December, 2016.