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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: S/SHRI B.R.BASKARAN & AMARJIT SINGH
PER AMARJIT SINGH, JM:
The appeal in ITA No.7976/Mum/2010 for the assessment year 2005-06 has been filed by the assessee against the order dated 03.09.2010 of the learned Commissioner of Income Tax (Appeals)-7, Mumbai [hereinafter referred to as the “learned CIT(A)”] passed in appeal No.CIT(A)-7/DCIT.3(1)/IT-294/09-10. The assessee has challenged the above mentioned order on the following grounds:-
“1. That on facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) - VII, Mumbai (briefly 'the CIT(A)'
ITA No.7976/M/10 Assessment Year: 2005-06 has erred in upholding levy of penalty of Rs.75,11 ,443/- imposed under section 271(1 )(c) of the Income tax Act, 1961 ("the Act").
That on facts and circumstances of the case and in law, the CIT(A) in holding that difference between loss originally returned on the basis Of provisional balance sheet and profit & loss account and income declared on the basis of audited account represented concealed income and / or furnishing of inaccurate particulars of income.
That on facts and circumstances of the case and in law, the CIT(A) erred in holding that the present case was squarely covered by Explanation to section 271(1 )(c) of the Act.
That on facts and circumstances of the case and in law, the CIT(A) erred in holding that ratio of judgment of Hon'ble Supreme Court in UOI v. Dharmendra Textiles (2008) 306 ITR 277. 5. That on facts and circumstances of the case and in law, the order passed by the CIT(A) is bad in law and deserves to be set aside.”
The facts of the case are that the assessee had filed its return of income on 31.10.2005 declaring loss to the tune of Rs.41,64,860/-. Subsequently, the case was selected for scrutiny and a notice u/s. 143(2) of the Income Tax Act, 1961(in short “the Act”). was issued on 23.10.2006. Also a notice u/s. 142(1) of the was issued on 08.10.2007, seeking details on various points. Apart from the general requirement to substantiate the income/loss shown in the Income-tax return, the assessee was asked to show-cause why the accounts should not be got audited u/s 142(2A) of the Act since the loss of Rs.41,64,860/- shown in the Income-tax returns was based on un-audited accounts. On 14.12.2007, the assessee submitted the audited report and also filed a revised computation of its total income. In this computation, the income of Rs.1,63,62,413/- was shown against the loss to the tune of Rs.41,64,860/- as per the Income-tax return. The A.O. passed the assessment order u/s. 143(3) of the Act declaring income to the tune of Rs.1,63,62,413/- and also initiated penalty u/s.271(1)(c) of the Act. Later on, the penalty was imposed to the tune of Rs.75,11,443/- with respect to the difference between the income shown in the Income-tax return and finally Assessment Year: 2005-06 assessed. The A.O. concluded that the income of Rs.2,05,27,273/- for tax is as a result of scrutiny assessment.
The A.O. passed the order u/s. 271(1)(c) by recording the following reasons:-
“So far as the claim of the assessee regarding absence of any malafide intention is concerned, it is noted that after amendment of section 271(1)(c) with effect from 1.4.1976 when explanation 1 was added to it and w.e.f. 1 4.1989,when the word “deliberately” had been removed from the section 271(1)(c), the situations entirely changed. The legislature had shifted the onus on the assessee to prove that it had neither furnished inaccurate particulars of income by concealing them or it is not covered even under the deeming provisions provided by explanation 1, according to which an assessee was deemed to have concealed the particulars of its income and furnish inaccurate particulars of its income for the purpose of section 271(1)(c)in respect of any expense claimed in the return or income, under the following circumstances.- (i) If the assessee did not submit: any explanation, (ii) If the explanation submitted by the as assessee was found false by the authorities. (ii) If the assessee failed to substantiate its claim made and prove that the claim made was bonafide and that all the facts relating to the same and material to the computation of its income had been disclosed
In view of the above provision, the onus was on the assessee and it could not discharge the same. According to the provisions of explanation 1 to section 271(1)(c), the assessee has to be deemed to have concealed it income by filing inaccurate particulars of its income, for the purpose of section 271(1)(c). The assessee is therefore deemed to have concealed the particulars of its income.
In view of the above discussion, it also gets proved that the concealed income could be brought to tax only as a result of scrutiny by the department. Had the case not been selected for scrutiny and the relevant queries not been raised during the assessment proceeding, the assessee company would not have recomputed its income and offered the same for tax. I, therefore, hold that the assessee has concealed the particulars of its income/furnished inaccurate particulars of income as Assessment Year: 2005-06 envisaged by section 271(1)(c) of the income-tax Act, 1961, in respect of me amount or Rs.2,05,27,273/-."
Subsequently, the assessee filed an appeal before the learned.CIT(A)-7, Mumbai and the learned CIT(A) uphold the penalty impose by the A.O. and recorded the following reasons:
“I have considered the facts of the case. It is an un-denied fact that income-tax return was filed at loss of Rs.41,64,860/- and finally assessed at Rs.1,63,62,413/- and the difference was due to concealment of income as well as furnishing of inaccurate particulars in the income- tax return and therefore covered by the provisions of section 271(1 )(c) of the Income-tax Act. The only aspect for consideration is whether the assessee had reasonable cause for the failure. According to the appellant, the return of income was based on provisional balance-sheet and in the earlier years also the income-tax return was filed on the basis of provisional balance-sheet and it was subsequently revised. If a return is revised as per law, it substitutes the earlier return and no adverse conclusion can be drawn. However, in the present case, there is no such revision of return. Only a computation of income has been filed and that too after the A.O. issued notice u/s 143(2)/ 142(1) of the income-tax Act. Not getting the accounts audited in time and therefore filing the return on the basis of provisional balance-sheet cannot be a reasonable cause for furnishing inaccurate particulars or concealment of Income in the return. If this logic is accepted, then probably it will be convenient for every assess e to just file the Income-tax return based on “Provisional Balance-sheet and Profit and Loss Account" and file revised computation when a notice is issued by the Income-Tax Department. I, therefore, do not find any reasonable cause for the failure and the A.O. as rig y imposed penalty u/s .271 (1 )(c) of the Income-tax Act.”
We have heard the representative of the parties and have gone through the materials filed. The representative of the assessee has argued that the assessee had filed the provisional return and subsequently, revised/audited account was filed after receipt of the notice and there was no concealment of any particulars to evade the income and did not furnish Assessment Year: 2005-06 any inaccurate particulars. However, revised return has been filed after concluding the audit, wherein, the assessee company mainly lowered its claims of depreciation under the Act, offered advance written off as income and offered disallowance u/s. 40(a) for the tax. Therefore, under the said circumstance, no penalty is leviable and in view of the law settled in the case of Bangalore Steel Distributors Vs. Income Tax Officer, Nath pronounced on 31.08.2012, ITAT Delhi Bench. It is also specifically argued that the assessee voluntarily offered the tax without pointing out by the AO any illegality or unanimous, hence no penalty is leviable u/s. 271(1)(c) in view of the law settled in case of CIT Vs. Harnarain (2012) 67 DTR(Del) 172 in ITA No. 2072 of 2010 dated 31st October 2011. 6. On the other hand, the learned DR strongly place reliance on the order of the learned CIT(A) and argued that the assessee has only offered the income when the case came up for scrutiny assessment. Therefore, the penalty u/s. 271(1)(c) has rightly been imposed.
With due regards the contention raised by the legal representative of the parties, it came into the notice that it is not disputed that initially the appellant filed the return of income on 31.10.05 declaring the loss to the tune of Rs.41,64,860/-. Later on, the case was selected for scrutiny and a notice u/s 143(2) was issued on 23.10.2006. Also, notice u/s. 142(1) was issued on 08.10.2007 seeking details on various points. The assessee was asked to show-cause why the accounts should not be got audited u/s. 142(2A) of the Act, since the loss of earlier return was based on un- audited accounts. Therefore, after in pursuance of the said notices the assessee showed his income to the tune of Rs.1,63,62,413/- against the loss which has been shown in the earlier return to the tune of Assessment Year: 2005-06 Rs.41,64,860/-. The A.O. has also specifically mentioned in his order that the revised computation filed by the assessee mainly on the basis of lowering its claims of depreciation under the Act, offered advance written off as income and offered disallowance u/s. 40(a) for the tax. No doubt, in the view of the order of the A.O. the revised computation has been filed while the figure has already been reflected in the return of income filed on 31.10.2005. The order of A.O. no were speaks about the concealment of the particulars to evade the tax and also nowhere speaks about the furnishing of inaccurate particulars to evade the tax. The only reason which has been stated by the learned CIT(A) that the assessee filed the revised return only after issuance of notice, is not sufficient reason to impose the penalty upon the assessee. The similar question came before the co-ordinate bench of Bangalore in case of Bangalore Steel Distributors Vs. Income Tax Officer, ITAT, Bangalore bench. The head note read as under :
“Penalty under section 271(1)(c) – Concealment – Original returns filed by the assessee subsequently revised on the basis of subsequently audited accounts – Survey conducted in between filing of original and revised returns revealing nothing discriminatory- Income finally assessed in keeping with the revised returns – Assessing officer levying penalty under section 271(1)(c) on account of difference in income originally returned and income as finally assessed-Not justified-The original returns having been filed on unaudited accounts and revised returns after conducting audit and nothing incriminating having been found in search, the revised returns were valid and concealment, if any, can be considered qua revised only-No penalty leviable on the facts of the case.” Assessment Year: 2005-06 No. 2072 of 2010 dated 31st October 2011. The head note read as under :
“Penalty under section 271(1)(c) – Concealment – Gift amount voluntarily offered as taxable income – AO included the amount of gift in the total income of the assessee merely on the basis of latter’s declaration-AO did not point out or refer to any evidence or material to show and establish that the gift received by the assessee was bogus or sham-Also, it is not the case of the Revenue that material was found during the search at the residential premises of the assessee indicating that the gift was an arranged affair to accommodate assessee’s unaccounted money-In response to a query in the questionnaire, assessee had furnished the details of the gift received by him in the relevant year and had also furnished a copy of the gift deed along with his reply-Further, it was clarified by the assessee that the gift under consideration was genuine and the related documents were sent to the AO-Thus, there was no detection by the AO that the gift was not genuine-Surrender of the amount by the assessee after receipt of the questionnaire could not lead to an inference that it was not voluntary- Penalty rightly deleted.” In view of the said facts and circumstances, we are of the view that the no penalty is leviable on the assessee in view of the provisions u/s. 271(1)(c) of the Act, hence the order of learned CIT(A) is hereby to be set aside.
In the result, the present appeal of the assessee is hereby allowed.
Order pronounced in the open court at the time of hearing on 18th November, 2015 (AMARJIT SINGH) (B.R.BASKARAN) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER
मुंबई Mumbai; "दनांक Dated : 18th November, 2015 MP MP MP MP Assessment Year: 2005-06
आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant
""यथ" / The Respondent. 3. आयकर आयु"त(अपील) / The CIT(A)- 4. आयकर आयु"त / CIT
"वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER, स"या"पत ""त //// उप/सहायक पंजीकार (Dy./Asstt.