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Income Tax Appellate Tribunal, DELHI BENCH SMC-I NEW DELHI
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER This appeal filed by the assessee is directed against the order passed by the Ld. Commissioner of Income Tax(Appeals)- XXII, New Delhi wherein by the impugned order dated 27/07/2012 the learned First Appellate Authority has confirmed penalty of Rs. 1,08,548 levied under section 271(1)(c) of the Income Tax Act 1961.
From the records, it is seen that the original return of income was filed declaring net taxable income of Rs. 1,73,710/- which was later revised to Rs. 2,59,560/- after including sale of a scrap at Rs. 85,850/- and capital gains at nil claiming deductions of Rs. of 12,22,667/- under section 54 of the Income Tax Act, 1961. Assessment under section 143 (3) of the Income Tax Act, 1961 was completed at an income of Rs. 7,06,930/- after adding Rs. 5,33,223/-on account of capital gains. During the year, the assessee had sold a residential house for Rs. 34,38,000/- and had invested Rs. 18,75,000/- in the acquisition of new residential property. Due to indexation, the capital gains amounted only to Rs. 12,22,667/- and the claim under section 54 was limited to this amount only. It is seen from the records that originally the capital gains were computed at nil but later during the assessment proceedings, the assessee surrendered an amount of Rs. 7,15,000/- towards cost of improvement incurred in financial year 1998-1999 in absence of vouchers for expenses.
In the penalty proceedings, it was the assessee's contention that the surrender was made with an aim to buy peace of mind and avoid protracted litigation. However, the AO imposed a penalty of Rs. 1,08,548/- under section 271 (1) (c) of the Act. The penalty was imposed vide order dated 28/06/2012 with the following observations:-
“Assessment in this case was completed under section 143 (3) wide order dated 24th of December 2011 at an income of Rs. 7,06,930/- against returned income of Rs. 1,73,710/-.
The brief facts of the case leading to penalty under section 271(1)(c). The case was selected for a scrutiny through CASS with remarks of sale of property of Rs. 39,31,000/-. Assessee has declared Nil Long Term Capital Gain in his returned income. The assessee could not produce the details of cost of construction claimed during the year 1998-99 for Rs. 7,15,000/- neither assessee could produce the source of expenditure on property in spite of repeated reminders whereas claimed for stamp duty has been given to the assessee though it was not claimed in the return. Hence, the Long Term Capital Gain was arrived at Rs. 5,33,223/-, which were accepted by the AR at the time of assessment proceedings. In case, the case would not have been selected under scrutiny, the assessee would have cheated the Government. Hence, it was detrimental to the revenue and I impose the penalty of Rs. 1,08,548/- under section 271(1)(c), which is equal to 100% of tax or to be evaded.”
Aggrieved, the assessee preferred an appeal before the First Appellate Authority which was dismissed with the following remarks:-
“8.25 In the present case also, it is seen that the assessee has made the bogus claim of a scrap sale for Rs. 85,850/- only as a tool for giving the colour of genuineness to the otherwise non-genuine claim of construction (referred to as the ‘Disputed Construction’ above). The claim made by the assessee was clearly mala fide, and in fact the mala fide intention of the assessee in claiming false investment of Rs. 7,15,000/- 3 during FY 98 - 99 to suppress the taxable Capital Gains is visible to the naked eye and no authority can remain a mute spectator to such mala fide claims. As held by the Hon'ble ITAT, Mumbai in the case of Champalal K Vardhan (supra), as the claim itself is mala fide, no one can save the assessee from facing the music.
8.26 In view of the above discussion it is held that penalty under section 271 (1) (c) is imposable upon the assessee, as the assessee concealed the particulars of his income and furnished inaccurate particulars of such income. Accordingly, the penalty of Rs. 1,08,548/- imposed upon the assessee for assessment year 2009- 10 vide order dated 28/06/2012 is hereby upheld.”
None appeared for the assessee, however, written submissions have been filed which are available on record.
The learned AR relied on the orders of the AO and the CIT (A).
We have gone through the case records and have given the facts due consideration. It is seen that the penalty has been levied and confirmed on account of assessee's failure to substantiate her claim of improvement to the property which was carried out in financial year 1998-99. It is seen from records that the assessee surrendered the amount claimed as cost of improvement because of her inability to produce the relevant bills and vouchers after a lapse of almost 10 years. However, in penalty proceedings, mala fide was attributed to the assessee's claim in this regard and the penalty was imposed. We are of the view that penalty cannot be levied on presumptions only. Both 4 the AO as well as the Commissioner have not demonstrated as to how mala fide could be attributed to a claim which, after a lapse of more than a decade, could not be substantiated by proper documents. We place reliance on the judgement of the Hon'ble Supreme Court in the case of Dilip N Shroff versus JCIT 291 ITR 519 wherein the Hon'ble apex court has observed as follows:
“48. Primary burden of proof, therefore, is on the revenue. The statute requires satisfaction on the part of the assessing officer. He is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee had concealed the amount or furnished inaccurate particulars and this onus is to be discharged by the Department.
While considering as to whether the assessee has been able to discharge his burden, the assessing officer should not begin with the presumption that he is guilty.
Once the primary burden of proof is discharged, the secondary burden of proof would shift on the assessee because the proceeding under section 271 (1) (c) is of penal nature in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the Parliament considers to be against public interest and, therefore, it was for the Department to establish that the assessee shall be guilty of the particulars of income.
The order imposing penalty is quasi-criminal in nature and, thus, burden lies on the Department to establish that the assessee had concealed his income. Since burden of proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitutes good 5
evidence in the penalty proceedings. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle.”
In the case of CIT vs Reliance Petroproducts Private Limited 322 ITR 158 (SC), the Hon'ble Apex Court has laid down the law as under:-
“A glance at the provisions of section 271(1)(c) of the Income Tax Act, 1961 suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of income. The meaning of the word ‘particulars’ used in section 271(1)(c) would embrace the details of claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false, there is no question of inviting the penalty under section 271(1)(c). A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the 6 return cannot amount to furnishing inaccurate particulars.
In the case under consideration although both the lower authorities have alleged that the assessee had furnished inaccurate particulars with a mala fide intention, the same has not been substantiated convincingly by the department so as to attract penalty. The only finding against the assessee is that she could not produce the relevant vouchers after a lapse of ten years. Even the Income Tax Act requires maintenance of records for only eight years. So it is harsh on the assessee to expect her to produce records for a period falling beyond the statutory prescribed limit. Moreover, the assessee has any way been taxed on the amount remaining unsubstantiated. However, drawing an inference as to the malafide intention of the assessee in this regard is a mere presumption. Hence, we are unable to concur with the observations of the Ld. Commissioner of Income Tax (Appeals) and set aside his order and direct that the penalty imposed be deleted.
In the result the appeal of the assessee is allowed.
Order pronounced in the Open Court on 17th of March, 2016.