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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri M. Balaganesh, AM & Shri K. Narasimha Chary, JM]
ORDER Per Shri K. Narasimha Chary, JM:
This appeal by revenue is arising out of order of CIT(A)-XXXVI, Kolkata vide appeal No. 69/CIT(A)-XXXVI/Kol/Wd.55(4)/2012-13/663 dated 31.07.2013. Assessment was framed by ITO, Ward-55(4), Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2009-10 vide his order dated 23.12.2011. Penalty imposed by ITO, Wd-55(4), Kolkata u/s. 271(1)(c) of the Act vide his order dated 21.06.2012.
Brief facts of the case are that the assessee is an individual having multiple sources of the income. The assessee during the FY received a sum of Rs.73,77,914/- from M/s. Grasim Industries Ltd. on 11.06.2009 i.e. during FY 2008-09 relevant to AY 2009-10. Tax deduction of Rs.9,39,238/- was made from the said commission payment by Grasim Industries Ltd. in the year 2008-09 corresponding to AY 2009-10. As per the mercantile system of accounting, the assessee should have included this income in the relevant assessment year but under the mistaken impression on actual receipt basis they have included the same in the income of next year. However, on coming to know of this lapse, the assessee claims to have filed a revised computation of income voluntarily and even before the AO detected the said lapse. However, the AO initiated penalty proceedings holding that the act of the assessee amounts to deliberate avoidance of tax payment, and imposed penalty on the addition of Rs.73,77,914/- towards commission income for Shri Jay Kumar Khemka, AY 2009-10 deliberate concealment of income. Aggrieved by the said penalty order assessee carried the matter in appeal before CIT(A), who vide para 5.2 reached to a conclusion that the assessee never intended to conceal the receipt as alleged by the AO but it is only a matter of showing the income in the subsequent year due to bona fide mistake. On this premise, the ld. CIT(A) deleted the penalty.
Challenging the said order of the CIT(A) the revenue came in appeal before us on the following Grounds: “
1. That, on the facts and under the circumstances of the case, Ld CIT(A) has erred in deleting the penalty of Rs 25,06,868/- imposed u/s 271(1)( c) of Income-tax Act 1961 on account of concealment of commission income as per IT return .
2. That, on the facts and under the circumstances of the case, the assessee did not voluntarily and in good faith disclose the commission received from the Grasim Industries Ltd in his tax- return.
3. That, on the facts and under the circumstances of the case, the assessee surrendered the commission earned from Grasim Industries Ltd, only after the AO detected it.
4. That, on the facts and under the circumstances of the case, the assessee did not even file any revised return to offer the commission amount, if it had been a bonafide mistake on his part to report the same in the original return.
5. That, on the facts and under the circumstances of the case, Ld CIT(A) has erred in law in relying on certain old judgments which call for establishing the mens rea of the assessee which are reversed by the Hon'ble Supreme Court in subsequent judgments and holding penalty u/s 271 (1 )( c) as of civil liability.
6. That, on the facts and under the circumstances of the case, Ld CIT(A) has erred in law in not appreciating the true import of section 271 (1)( c) which is to spread deterrent effect and bring fiscal discipline amongst the assessees.”
4. It is the argument of the Ld. DR that the assessee did not disclose the income voluntarily as claimed by the assessee but the disclosure took place only after the lapse was detected by the AO and having no other option the assessee declared the same, as such, the mere plea of the assessee that the income was calculated on cash basis is not suffice to drop the penalty proceedings. According to the Ld. DR, u/s. 271(1)(c) of the Act it is not the mere concealment but furnishing of inaccurate particulars of income, which would also attract penal proceedings and for this purpose, mens rea is not an essential ingredient. He further submitted that the Act of the assessee for omitting this particular item of income in the original return but declaring the same only in the revised computation after being confronted with the same amounts tantamount to furnishing inaccurate particulars or concealment of income and for these reasons, the conclusion reached by the CIT(A) are not at all acceptable. According to Ld. CIT(A), deterency is one of the modes of enforcement of law without which it will not be possible for the revenue to implement the provisions of Shri Jay Kumar Khemka, AY 2009-10 the Act and to obtain the desired results. For these reasons, he prayed before us to hold want of bona fides on the part of the assessee and to restore the penalty imposed by the AO.
5. On the other hand, it is the argument of the Ld. AR that there is a bona fide mistake for not including the particular income in the return of income for the relevant year and it is evident from the fact that not only in the next year income it was included but also that the moment the assessee came to know of this lapse, without any demur he offered the same to tax. For the sake of deterrence, the bona fide wrong doers cannot be punished and it is not the intent of the penalty proceedings.
6. Basing on the above facts and contentions the issue that arises for our consideration is whether the CIT(A) is justified in deleting the penalty imposed by the AO on the premise that the assessee deliberately concealed the income?
7. Absolutely there is no dispute in the facts that though the assessee failed to include the commission income in question in the return submitted in respect of the AY 2009-10 but, as a matter of fact, he included the same in the return of income for AY 2010-11. The assessee claims it to be a bona fide mistake done under the belief that the income will be included in the return on receipt basis and that is the reason why the same was included in the return in the subsequent year. According to the Ld. DR it is a deliberate attempt to conceal the income on the part of the assessee.
The Ld. CIT(A) had extensively gone into this question and discussed various factors involving in this matter. He referred to the letter dated 18.11.2011 received by the AO on 21.11.2011 whereunder the assessee acknowledged his mistake in omitting the income in respect of the AY 2009-10 and prayed to include the same in the return. The Ld. CIT(A) also noticed that the letter of AO calling upon the assessee to explain the omission for this income in the return was dated 30.11.2011. It goes without saying that even before the AO questioned the assessee about the alleged lapse of omitting the commission income in the return, the assessee came forward with his acknowledgment of mistake and offered for inclusion of the same in the return by filing revised computation of income on 21.11.2011. It is also submitted that while paying the commission, an amount of Rs.9,39,238/- was Shri Jay Kumar Khemka, AY 2009-10 deducted as tax by Grasim Industries Ltd. In that event, it is very difficult to understand how the assessee stands to gain by not showing this particular income in the return.
The Ld. CIT(A) has called for the record relating to AY 2009-10 and 2010-11 for verification and on verification he recorded a finding that the record corroborates the contention of the assessee that the commission amount of Rs.73,77,914/- was received in June, 2009, it ought to have been shown in the FY 2008-09 on accrual basis but it was shown in the next year on cash basis. On this verification, the Ld. CIT(A) opined that it is a case of showing the income in the subsequent year due to the receipt of the same during the subsequent FY and certainly it is a bona fide mistake. The Ld. CIT(A) also found that since the assessee rectified the mistake voluntarily offering the income in the AY 2009-10 and not challenging the addition made by the AO in appeal, a lenient view is to be taken and accordingly, deleted the penalty.
We find that the assessee by making an additional disclosure of income of Rs. 73,77,914/- for the Asst Years 2009-10 before any detection by the department in order to meet the deficiencies, if any, on the outflows of the assessee, had sought to genuinely rectify the omission or misdeed which had been made in the original disclosure statement u/s 132(4) of the Act. On this point we profitably make reference to 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.
Shri Jay Kumar Khemka, AY 2009-10 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.
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 Shri Jay Kumar Khemka, AY 2009-10 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 of law is that merely because an assessee had agreed to the assessment that cannot bring in automatic levy of penalty.
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.”
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.
It is a judicially acknowledged fact that the tax laws of this country are complex and complicated and often requires for compliance therewith, the assistance of a tax practitioner specializing in this field. It is possible that mistake could happen by improper understanding of the law and practice. Viewing from this angle coupled with the fact of the voluntary rectification of the mistake by the assessee besides he is declaring the income in the return of next year, we find that the breach is only venial in nature. With this view of the matter, we do not propose to interfere with the finding of the Ld. CIT(A) and sustain the same. We, therefore, answer the issue in the affirmative holding that the deletion of penalty by the CIT(A) does not suffer any illegality or irregularity.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 10.08.2016