V.ANBURAJ,CHENNAI vs. DCIT, CHENNAI

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

The appeal filed by the assessee is directed against order of the Commissioner of Income-tax (Appeals)-VIII, Chennai in ITA No.21/11-12(A)-VIII, dated 14.12.2012 for the assessment year 2008-

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2009 passed u/s.271(1)(c) and 250 of the Income Tax Act, 1961

(herein after referred to as ‘the Act’).

The assessee has raised the following grounds:- 2.

‘’2. The appellant had undertaken professional duties for HSBC Bank in the name of MIs Kevin Logistics. Since there was an understanding that the tax would be borne by the employer, the bank the tax that was deducted was reimbursed. The appellant was under the wrong impression that since tax was borne by bank, it was not liable to tax. All the facts were available on records. The omission should have therefore been accepted as bona fide.

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explanation not found to be false, penalty, it is submitted is, therefore, not exigible.

proprietor of M/s. Kevin Logistics and provides business support

services to HSBC Bank. For the assessment year 2008-09 the assessee

filed Return of income on 23.08.2008 with total income of

�15,04,912/-. Subsequently as per CASS norms, the case was selected

for scrutiny and notice u/s.143(2) and 142(1) of the Act was issued.

In compliance to notices, the ld. Authorised Representative of assessee

appeared and explained that assessee is providing business support

service to HSBC and receive service charges and same was offered in

profit and loss. During the assessment proceedings, the ld. Assessing

Officer found a difference in gross income offered in profit and loss

account and TDS certificates and assessee filed clarification through

letter dated 22.10.2010 and explained as under:-

‘’While filing the return claim of Service Tax and TDS reimbursed are not offered as income. Service Tax claimed is remitted to department periodically. TDS reimbursement has not been offered to income tax erroneously, Since I was

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under the impression and firm belief that it is not subject to tax and it is not a part of income.

Now I am advised that TDS reimbursed should also forming part of income. 1. Gross income as per form 16A �6.57 Crores. 2. Income as per profit and loss Ac. �5.54 Crores. -------------------- 3.Difference �.1.03 Crores Difference is represented (a) Service Tax �0.62 Crores (b) TDS reimbursement �0.41 Crores. ----------------------- �1.03 Crores ----------------------

Hence, I would like to offer this TDS reimbursement as income. I would like to submit that I have not concealed any income and request you not to initiate penal proceedings’’.

The actual difference being TDS reimbursement of �41,42,995/- and

the assessee has offered income in revised computation of income

before Assessing Officer. The ld. Assessing Officer made addition of

�4,00,000/- as the assessee is a partner in M/s. Surya trading and

assessee could not substantiate with proper source to the extent of

introduction of capital in partnership firm and passed order u/s.143(3)

of the Act dated 31.12.2010. Subsequently, the Assessing Officer

initiated penalty proceedings and in compliance, the ld. Authorised

Representative of the assessee appeared and filed explanations. In

the penalty proceedings, the assessee submitted exhaustive

explanations and clarifications on the addition. The ld. Assessing

Officer is of the opinion that assessee failed to explain the genuineness

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of TDS reimbursements and the reasons for not including the same as

income for the assessment year and further assessee could not prove

fully with sources for introduction of capital. With these observations,

the ld. Assessing Officer levied penalty of �15,55,935/-. Aggrieved by

the order, the assessee filed an appeal before Commissioner of Income

Tax (Appeals).

In the appellate proceedings, the ld. Authorised 4.

Representative substantiated his arguments and explained the reasons

that the assessee could not offer such income at the time of filing of

return and the same was disclosed in the assessment proceedings.

The assessee has neither conceled income or furnished inaccurate

particulars and the additions are made prima facie based on the

material documents furnished by the assessee. The penalty

proceedings are initiated treating the addition as conceled income and

assessee has submitted all documents and records in the assessment

proceedings and same were considered for levy of penalty. The ld.

Commissioner of Income Tax (Appeals) considered the submissions,

grounds and expressed opinion on the additions elaborately in his

order and came to a final conclusion that clarifications furnished by

the assessee cannot be considered as there is no excuse on ignorance

of provision of law and further on introduction of fresh capital in the

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partnership firm and the offering of income does not provide immunity

from penalty proceedings. The assessee inability on explaining the

source of capital cannot be ignored. The ld. Authorised Representative

submitted that assessee has voluntarily offered TDS reimbursement

amount from HSBC bank as income before detection by the Revenue.

There is no concealment of income but reconciliation of amount before

Assessing Officer. Non availability of source for introduction of fresh

capital to the extent of �4,00,000/- in partnership firm and cannot be

concealment. The assessee has failed to include reimbursement of

income in the profit and loss account and clarification are not

convincing and could not be explained with valid reasons. Further, the

assessee could not establish creditworthiness of fresh capital

introduced in the firm. The assessee has not preferred an appeal

against order u/sec. 143(3) of the Act dated 31.12.2010 and which is

not a valid reasonable cause in penalty proceedings and ld.

Commissioner of Income Tax (Appeals) has upheld the order of

Assessing Officer. Aggrieved by the order of Commissioner of Income

Tax (Appeals), the assessee has assailed an appeal before Tribunal.

Before us, the ld. Authorised Representative has reiterated 5.

the submissions with documentary evidence of the assessment

proceedings, penalty and appellate proceedings. Before Assessing

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Officer the assessee has offered income in respect of reimbursement

of TDS by the bank were the assessee was under bonafide impression

that the income tax has been paid by the bank and on the second

addition of introduction of cash in partnership firm due to busy

schedule the assessee could not recollect the sources and to buy

peace with the department accepted addition and not contested the

quantum appeal before Commissioner of Income Tax (Appeals). The

assessee also filed an affidavit on the additions and prayed for deletion

of penalty as there was a voluntary admission of the income and

prayed for set aside of the order of Commissioner of Income Tax

(Appeals).

Contra, the ld. Departmental Representative relied on the 6.

orders of lower authorities and opposed to the grounds of appeal.

We heard the rival submissions, perused the material, 7.

documentary evidence and affidavit filed by the assessee. The only

contention which ld. Authorised Representative has expressed

repeatedly on understanding with the bank that tax will be borne by

bank and reimbursed. Further, the assessee has voluntarily filed

revised statements and has offered reimbursement amount in

assessment proceedings and calculations are based on the documents

i.e form No.16A and books of account. On introduction of fresh

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capital as partner in partnership could not be established with any

accounted source and is disbelieved. We have perused the affidavit of

the assessee on the issue of reimbursement of TDS of �41,42,995/- as

per the understanding of the bank, the assessee is regularly rendering

service to the bank. Prime facie the assessee accepted the payments

net of taxes and included in profit and loss account only the amounts

which are received. The discrepancies in amount due to TDS and the

profit and loss account were the Auditor has advised the assessee to

accept the income and the same was brought on record. The

assessee statement seems to be reasonable as gross receipt offered

�5.54 Crores in profit and loss account. If there was clarity on taxes

the assessee could have definitely included in the return of income as

affirmed by the assessee in the affidavit. We find on this ground there

is a reasonable cause and other ground of introduction of capital the

assessee has introduced cash in the firms books as capital introduction

which assessee could not give satisfactory explanation. The

explanation given by the assessee is that he has accepted the addition

only to purchase peace. This explanation is very common in nature and

cannot be said that it is a bonafide. We also place reliance on the

judgment of Supreme Court in the case of Mak Data (Pvt) Ltd. vs. CIT

358 ITR 593, wherein it was held that :-

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‘’ the assessee had only stated that it had surrendered the additional sum of ₹ 40,74,000 to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the Income-tax Department. The statute did not recognize those types of defences under Explanation 1 to section 271(1)(c) of the Act. The surrender of income in this case was not voluntary in the sense that the offer of surrender was made in view of detection by the Assessing Officer in the search conducted in the sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it was clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The Assessing Officer had recorded a categorical finding that he was satisfied that the assessee had concealed the true particulars of income and was liable for penalty proceedings under section 271 read with section 274 of the Act. There was no illegality in the Department initiating penalty proceedings’’

So, considering the facts, we direct the Assessing Officer to levy

penalty only on the addition of capital introduction in firm by the

assessee and set aside the order of Commissioner of Income Tax

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(Appeals) and remit the issue in dispute to Assessing Officer to recompute the penalty leviable.

In the result, the appeal of the assessee in ITA 8. No.546/Mds/2013 is partly allowed.

Order pronounced on Thursday, the 19th day of May, 2016, at Chennai.

Sd/- Sd/- (चं� पूजार�) (जी. पवन कुमार) (CHANDRA POOJARI) (G. PAVAN KUMAR) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य /ACCOUNTANT MEMBER

चे�नई/Chennai �दनांक/Dated:19.05.2016 kv आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF