Case Law Details

Case Name : Dy. CIT Vs. Mukesh Kalubhai Prajapati (ITAT Ahemdabad)
Appeal Number : ITA No. 300/Ahd/2016
Date of Judgement/Order : 06/09/2017
Related Assessment Year :
Courts : All ITAT (4421) ITAT Ahmedabad (332)

Dy. CIT Vs. Mukesh Kalubhai Prajapati (ITAT Ahemdabad)

We observe that the additions have been made under s.68 of the Act as purported lender M/s.Sudarshan Enterprise denied having been lent the money to the assessee. As a consequence of the revelations on inquiry, the assessee grudgingly came forward for admission of the aforesaid loan as unexplained income. Thus, plea of the assessee that the disclosure was made voluntarily or in good faith is difficult to appreciate. A disclosure made under the fear of a plausible penalty or other proceedings cannot be termed voluntary or made in good faith. The Department was in possession of definite proof that purported lender as reflected in the books of accounts has not lent money at all. In these circumstances, the reliance placed by the Commissioner (Appeals) in the case of Shadilal Sugar Mills (168 ITR 705) is not contextually applicable. Mere request for non-initiation of penalty on the ground of disclosure branding the same to be voluntary with a view to buy peace and avoid litigation will not take the assessee out of the scope and ambit of Explanation-1 to section 271(1)(c) of the Act. The case of the assessee is squarely covered by the observations of the Hon’ble Supreme Court in MAK data Pvt. Ltd. (SC) where Hon’ble Supreme Court observed that the statute does not recognize defences like ‘voluntary disclosure’, ‘buy peace’, ‘avoid litigation’, ‘amicable settlement’ etc. Thus, even voluntary surrender of income will not always necessarily rescue the assessee from the penalty provisions which are in the nature of remedy for loss of possible revenue. In the instant case, the surrender has been made later during the course of assessment proceedings after detection of untruthfulness of the version of the assessee. In these circumstances, the view adopted by the Commissioner (Appeals) of favorable treatment to such assessee cannot be endorsed. We also notice that the penalty has been imposed for concealment of particulars of income which is consistent with the facts of the case. The assessee has not expressed its handicap anywhere before the lower authorities on the alleged vagueness of notice issued under section 274 row with section 271(1)(c) which prevented him in his response in any manner. The onus which lays upon the assessee to rebut the presumption of concealment under Explanation-1 to section 271(1)(c) has not been discharged. Under the circumstances, the order of the Commissioner (Appeals) is requires to be reversed and the penalty order of the assessing officer requires to be upheld.

Full Text of the ITAT Order is as follows:-

The captioned appeal by the Revenue against the order of the Commissioner (Appeals)-10, Ahmedabad (CIT(A) in short) dated 14-12-2015 for the assessment year (AY) 2008-09 challenging the deletion of penalty imposed under section 271(1)(c) on addition of Rs. 43 lakhs made under section 68 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

2. Briefly stated, it was noticed by assessing officer (AO) in the course of scrutiny assessment for the assessment year 2008-09 that assessee has obtained unsecured loan of Rs. 43 lakhs from one M/s. Sudarshan Enterprise. The assessing officer on verification of PAN data on computer found that the PAN of the depositor M/s. Sudarshan Enterprise mentioned in the confirmation file does not pertain to it. Therefore to verify the genuineness of the transactions, a notice under section 133(6) of the Act was issued to M/s. Sudarshan Enterprise. In response thereof, M/s. Sudarshan Enterprise denied having made any transaction with the assessee as claimed. Show-cause notice was accordingly issued to the assessee for explanation on the inquiries conducted. The assessee filed vague reply and finally came forward to admit the said loan as unexplained income. The assessee however in the same vain submitted that the admission was made to buy peace and avoid prolonged litigation. The assessee claimed that disclosure has been made voluntarily and requested for non-initiation of penalty. In these circumstances, the additions were made and penalty was imposed thereon.

3. In the first appeal, the Commissioner (Appeals) found merit and deleted the penalty of Rs. 14,61,570 levied by the assessing officer under section 271(1)(c) of the Act. The relevant operative para of the order of the Commissioner (Appeals) is reproduced here under:-

“Decision:

4. The submissions made by the appellant have been considered with reference to the penalty order passed. The only effective ground of appeal is against the levy of penalty of Rs. 14,61,570 under section 271(1)(c) of the Act. The facts of the case is that during the course of assessment proceedings, the assessing officer noticed that the appellant has taken loan of Rs. 43 lakhs from M/s Sudarshan Enterprise. The appellant filed confirmation name, address and PAN of M/s Sudarshan Enterprise before the assessing officer to substantiate the credits in the books of account. On verification under section 133(6) of the Act done by the assessing officer, M/s Sudarshan Enterprise denied to have any transactions with the appellant. Therefore, during the assessment proceedings the appellant admitted Rs. 43 lakhs as his undisclosed income and paid taxes upon it. The assessing officer made addition under section 68 of the Act and penalty proceedings under section 271(1)(c) were initiated by issuing notice under section 274 row with section 271(1)(c) of the Act.

4.1 The appellant filed appeal before the Commissioner (Appeals) against the initiation of penalty under section 271(1)(c) which was dismissed by Commissioner (Appeals)-VI, Ahmedabad vide order dated 16-2-2012 stating that no appeal lies against the initiation of penalty.

4.2 On disposal of the appeal of the appellant as mentioned above by Commissioner (Appeals), the assessing officer imposed penalty under consideration vide order dated 20-03-2014. The appellant objected against the imposition of penalty on the following grounds :

(i) The penalty imposed by the assessing officer is barred by limitation of time period, as notice for imposition of penalty was issued on 28-10-2010, whereas penalty was imposed on 20-3-2014. The contention of the appellant is not as per the provisions of the Act, as the appeal filed by the appellant was pending before the Commissioner (Appeals), which was decided on 16-4-2012 and the penalty has, been imposed on 20-03-2014 which is within the time period allowed under section 275 of the Act. Therefore, this contention of the assessee is dismissed.

(ii) The second argument taken by the appellant is that the notice dtd. 28-10-2010 issued under section 274 row with section 271(1)(c) of the Act, it has not been mentioned specifically that whether the appellant has concealed the particulars of income or furnished inaccurate particulars of such income. The appellant relied upon the judgment of CIT v. White Ford India Ltd. delivered by the High Court of Gujarat, Ahmedabad in Tax Appeal No.498 of 2013.

The contention of the appellant has been carefully examined. The copy of the notice issued under section 274 row with section 271(1)(c) dtd. 28-10-2010 has been gone through and found that the assessing officer has not specifically mentioned whether the appellant concealed particulars of income or furnished inaccurate particulars of income.

Even in the penalty order dated 20-3-2014, there is no mention for which default the penalty has been imposed. As mentioned by the appellant, the jurisdictional Hon’ble High Court of Gujarat, Ahmedabad in the case of CIT v. White Ford India Ltd. adjudicated that where no clear finding was recorded by the assessing officer whether assessee was guilty of concealing of income or furnished inaccurate particulars of income, Tribunal was justified in deleting penalty under section 271(1)(c) levied by the assessing officer. Respectfully following the judgment of the Hon’ble High Court of Gujarat, Ahmedabad, this contention of appeal of the appellant is allowed as facts of the case are identical to the facts of the case decided by the jurisdictional High Court.

(iii) The next contention of the appellant is that the appellant has agreed for the additions during the course of assessment proceedings with specific request to buy peace of mind and avoid further litigation. The appellant relied upon the case of Sir Shadi Lal Sugar & General Mills Ltd. (168 ITR 705) (SC) in which it has been held that there may be 101 reasons for agreeing to additions but that does not follow the conclusion that amount agreed to be added was concealed income. On going through the assessment order and penalty order, it is found that the appellant has agreed for the additions with the specific request that penalty under section 271(1)(c) will not be initiated. Keeping in view these facts and the case laws cited by the appellant, this contention of the appellant is allowed.

(iv) The appellant further contended that the additions were made under section 68 of the Act which is a deeming provision for additions made under deeming provisions, penalty under section 271(1)(c) is not leviable as decided by the Hon’ble ITAT, Ahmedabad ‘D’ Bench in the case of ITO v. Haribhai Devrajbhai Babriya in ITA No.96/Ahd/2011. Keeping in view the facts of the case and case laws cited, the penalty levied by the assessing officer is not found justified, therefore, it is deleted.”

4. Aggrieved, the Revenue is in appeal before the Tribunal.

5. None appeared on behalf of the assessee. It is seen from the record that the notices were sent on various occasions in the past to the assessee. However, the assessee has failed to appear on the appointed date. The notice was served through the Income Tax Department also without any avail. In these circumstances, we are constrained to proceed ex-parte in the absence of the assessee.

6. The learned Departmental Representative for the Revenue contended that the Commissioner (Appeals) has committed error in granting relief to the assessee where the assessee had initially attempted to mislead the Income Tax Department and was left with no choice had to finally concede the income when no shelter was available in sight to the assessee with a view to escape the clutches of penalty. The learned Departmental Representative submitted that the disclosure made was not voluntarily at all. The request of the assessee not to impose penalty was not accepted by the assessing officer at all. The learned Departmental Representative referred to the decision of the Hon’ble Supreme Court in the case of MAK Data Pvt Ltd. v. CIT 358 ITR 593 (SC) and submitted that the aforesaid decision squarely governs the issue.

7. We have carefully perused the orders of the authorities below as well as the submissions made on behalf of the revenue. We observe that the additions have been made under s.68 of the Act as purported lender M/s.Sudarshan Enterprise denied having been lent the money to the assessee. As a consequence of the revelations on inquiry, the assessee grudgingly came forward for admission of the aforesaid loan as unexplained income. Thus, plea of the assessee that the disclosure was made voluntarily or in good faith is difficult to appreciate. A disclosure made under the fear of a plausible penalty or other proceedings cannot be termed voluntary or made in good faith. The Department was in possession of definite proof that purported lender as reflected in the books of accounts has not lent money at all. In these circumstances, the reliance placed by the Commissioner (Appeals) in the case of Shadilal Sugar Mills (168 ITR 705) is not contextually applicable. Mere request for non-initiation of penalty on the ground of disclosure branding the same to be voluntary with a view to buy peace and avoid litigation will not take the assessee out of the scope and ambit of Explanation-1 to section 271(1)(c) of the Act. The case of the assessee is squarely covered by the observations of the Hon’ble Supreme Court in MAK data Pvt. Ltd. (SC) where Hon’ble Supreme Court observed that the statute does not recognize defences like ‘voluntary disclosure’, ‘buy peace’, ‘avoid litigation’, ‘amicable settlement’ etc. Thus, even voluntary surrender of income will not always necessarily rescue the assessee from the penalty provisions which are in the nature of remedy for loss of possible revenue. In the instant case, the surrender has been made later during the course of assessment proceedings after detection of untruthfulness of the version of the assessee. In these circumstances, the view adopted by the Commissioner (Appeals) of favorable treatment to such assessee cannot be endorsed. We also notice that the penalty has been imposed for concealment of particulars of income which is consistent with the facts of the case. The assessee has not expressed its handicap anywhere before the lower authorities on the alleged vagueness of notice issued under section 274 row with section 271(1)(c) which prevented him in his response in any manner. The onus which lays upon the assessee to rebut the presumption of concealment under Explanation-1 to section 271(1)(c) has not been discharged. Under the circumstances, the order of the Commissioner (Appeals) is requires to be reversed and the penalty order of the assessing officer requires to be upheld.

8. In the result, appeal of the Revenue is allowed.

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Category : Income Tax (25488)
Type : Judiciary (10239)
Tags : ITAT Judgments (4601) section 271(1)(c) (314) Section 68 (173)

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