Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “SMC-I”: NEW DELHI
Before: SHRI VIJAY PAL RAO
O R D E R This appeal by the assessee is directed against the order dated 05.01.2015 of ld. CIT(A), New Delhi arising from penalty order passed u/s 271(1)(c) of the Act for the Assessment Year 2005-06. 2. The assessee has raised the following grounds:- “
On the facts and in the circumstances of the case and in law the authorities below erred in holding the assessee guilty of concealment of income and levying penalty u/s 271(1(c) of the Income Tax Act, 1961.”
3. The assessee filed its return of income on 28.10.2005 declaring total income of Rs.6,49,080/- which was processed u/s 143(1). Subsequently, during the course of search and survey proceeding carried out by the department it was noticed that various parties were involved in bogus entries transaction by taking cash and giving entries through cheques in the various forms like loan, share application money and sale or purchase of shares. It was found that share application money of Rs.6 lacs was received by the assessee from M/s. Shashi Jewellers, Shri Deepak Gupta and M/s. Milansar Impex & Traders Private Limited. In the assessment proceedings the AO issued summons to three parties from whom the assessee received the money and the summons were received back undelivered with postal remarks that “no such person at given address”. The AO proposed to add Rs.6 lac to the income of the assessee Page No. 2 comprising Rs.2 lac each from these three parties. The assessee has surrendered this amount of Rs.6 lac to taxing. Accordingly, the AO made an addition of the said amount of Rs.6 lac in the hands of the assessee being assessee’s own money. Subsequently, the AO initiated penalty proceeding u/s 271(1)(c) and levy a penalty of Rs.2,19,555/- being 100% of tax sought to be evaded vide order dated 20.09.2013. The assessee challenged the action of the AO before learned Commissioner of Income-tax (Appeals) but could not succeed.
4. Before this Tribunal the AR of the assessee has submitted that the assessee has surrendered the amount of Rs.6 lac received from three persons which does not find place in the information received by the AO from the investigation wing. However to avoid dispute with department and to buy peace the assessee surrendered the same. The AO has insisting to produce the creditors which were not in the control of the assessee. The ld AR of the assessee further submitted that the assessee filed confirmation of these three parties along with PAN, therefore the identity of creditors and genuineness of the transaction was explained by the assessee. The ld AR has pointed out that the assessee surrendered this amount in the assessment proceeding to avoid the litigation, however when the assessee had filed necessary evidence along with PAN of these creditors then the penalty proceedings being separate from the assessment proceedings, the AO should have considered the same and no penalty can be levied once the assessee has produced the relevant record. Further the surrender would not constitute that this amount is assessee’s own money. Even otherwise there was no basis of presumption that assessee’s own money is rooted through these transaction or alleged accommodation entries. Thus, the ld AR of the assessee has submitted that the learned Commissioner of Income-tax (Appeals) relied upon the decision of the Hon’ble Kerala High Court in the case of CIT Vs.DKB & Co 243 ITR 618 which is not applicable in the facts and circumstances of the present case. The surrender of this amount is not made in statement of the assessee, therefore, the self surrender is not applicable in the case of the assessee. When the assessee has explained the source of this amount by supporting evidence then though the explanation was not relevant for the purpose of the assessment as the assessee surrendered this amount however, the same is Page No. 3 very relevant for the purpose of levy of penalty u/s 271(1)(c). The ld AR has relied on the decision of Hon’ble Allahabad High Court in the case of Punjab Rice Mills Vs. CIT, 211 Taxmann 127 (Ald) and submitted that explanation to section 271(1)(c) in clause A is attracted when the person fails to offer an explanation or offers an explanation which is found to be false. Whereas clause-B of the explanation is attracted in a case where such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. Therefore, even if an addition is made if the explanation of the assessee falls in clause-B of the explanation 1 of Section 271(1)(c) then no penalty can be levied. He has also relied upon the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Steel Centre, 51 Taxmann.com 127 (Kar)and submitted that the Hon’ble high court has held that for imposition of penalty is not automatic. If the explanation offered, even though not substantiated by the assessee, but is found to be bona fide and all facts relating to the same and material for the computation of his total income have been disclosed by him, no penalty could be imposed. He has also relied upon the judgment of Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Chemicals Pvt. Ltd. 189 Taxman 322 (SC) and HP State Forest Corpn Ltd. 340 ITR 204.
On the other hand the ld DR relied upon the decision of Hon’ble Jurisdictional High Court in the Case of CIT Vs. Nova Promoters and Finlease Pvt. Ltd. reported on 342 ITR 0169, as well as the decision in the case of CIT Vs. N. P. Portfolio (P) Ltd. 264 CTR 258 (Del) and submitted that mere giving the PAN No. of the party itself would not prove the creditworthiness and genuineness of the transaction. She has also relied upon the judgment of the Hon’ble Supreme Court in the case of MAK Data Pvt. Ltd. Vs. CIT 358 ITR 593. The ld DR has also relied on the order of the authorities below.
I have considered the rival submission as well as relevant material on record. There is no doubt that the AO has initiated the penalty proceeding by making the addition on the basis of information of receiving the accommodation entries by the of the assessee which was detected during the search and survey proceedings. Though there was confusion about the names of the parties from whom the assessee has received the amount Page No. 4 however ultimately the assessee admitted to have received these amounts from three parties and decided to surrender this amount for taxation. Hence, the assessee has surrendered this amount to tax which is not voluntary act on the part of the assessee, but because of the proceeding initiated by the AO, after this fact of accommodation entries was detected in the search and survey proceedings. Therefore, the surrender of the amount by the assessee pre-empts the further investigation during the assessment proceedings. Even otherwise when the assessee has admitted this amount as income then no further investigation was required on the part of the AO to prove that this amount was received on account of accommodation entries received by the assessee. The Hon’ble Supreme Court in the case of Mak Data Vs. CIT (supra) while dealing with identical issue has held in para 6 to 11 as under:- “6. We have heard counsel on either side. We fully concur with the view of the High Court that the Tribunal has not properly understood or appreciated the scope of Explanation 1 to Section 271(1)(c) of the Act, which reads as follows :- "Explanation 1 - Where in respect of any facts material to the computation of the total income of any person under this Act, - (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed."
The AO, in our view, shall not be carried away by the plea of the assessee like "voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement", etc. to explain away its conduct. The question is whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question constituted the income and not otherwise.
Page No. 5 8. Assessee has only stated that he had surrendered the additional sum of Rs.40,74,000/- with a view 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. Statute does not recognize those types of defences under the explanation 1 to Section 271(l)(c) of the Act. It is trite law that the voluntary disclosure does not release the Appellant-assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved from penalty.
We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of a 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 is 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 AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961.
The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing. The scope of Section 271(l)(c) has also been elaborately discussed by this Court in Union of India v. Dharmendra Textile Processors [2008] 13 SCC 369 and CIT v. Atul Mohan Bindal [2009] 9 SCC 589.
The principle laid down by this Court, in our view, has been correctly followed by the Revenue and we find no illegality in the department initiating penalty proceedings in the instant case. We, therefore, fully agree with the view of the High Court. Hence, the appeal lacks merit and is dismissed. There shall be no order as to costs.