Brief of the Case
ITAT Jaipur held In the case of Nirmal Kumar Bardia vs. DCIT that argument of the assessee that the assessee had disclosed salary received from RMC Gems Thai Co. Ltd., Bangkok voluntarily has not substantiated with any evidence. The Assessing Officer issued notice U/s 153A to file the return in response to survey proceedings. Thereafter, the assessee has disclosed the salary received in Thai Bhat in Bangkok in global income. Similarly the excess claim of exemption U/s 54F had also not been revised even notice U/s 153A was issued to the assessee. The assessee was availing expert opinion on taxation matter as he was filing return since long and had number of businesses. Therefore, the assessee’s claim that he was ignorant about legal provisions proved that the assessee’s action was not bonafide. We have considered view that the assessee has concealed the particulars of income and furnished inaccurate particulars of income.
Facts of the Case
A search seizure action U/s 132(1) and survey U/s 133A was carried out on 23/08/2007 at the residence and business premises and survey was conducted at branch office located of the RMC Group of Jaipur. The assessee belonged to this group. In the course of search and survey action, cash, jewellery, valuables, books of account and documents were found and seized/impounded as per panchnama /order of respective dates. The Assessing Officer observed that in this case, the assessment was completed U/s 153A read with Section 143(3). Notice U/s 153A was issued for A.Y. 2006-07 on 25/01/2008 and assessee was asked to prepare a true and correct return of his total income in respect of his assessable for the year under consideration in the form prescribed in Rule 12 of the Income Tax Rules, 1962. In response to notice U/s 153A, return declaring income of Rs. 23,68,116/- was filed on 28/2/2008. In original return U/s 139(1), the assessee had declared income of Rs. 20,14,520/-, which was filed on 31/10/2006. The assessee had disclosed Rs. 3,53,599/- salary received from M/s RMC Gems Thai Co. Ltd., Bangkok in return of income filed in response to notice U/s 153A. The assessee served as employee in M/s RMS Gems Thai Co. Ltd., Bangkok. He had received 105000 Thai Bhat per month from 01/01/2006 to 31/12/2006.
The Assessing Officer further observed that salary for the three months pertaining to the F.Y. 2005-06 was surrendered in the year under consideration. This income from salary was not disclosed in return of income filed U/s 139(1). Proportionate salary for the three months amounts to 315000 Thai Bhat and Indian currency @ Rs. 1.1225 per Bhat it amounts to Rs. 3,53,599/-. On this income assessee had filed return in Thailand and paid tax on it and had claimed rebate U/s 90 of Rs. 47,456/-. The penalty proceedings U/s 271(1)(c) was initiated for furnishing wrong particulars and concealment of income in respect of income of Rs. 3,53,599/- by the Assessing Officer.
Further, the assessment for A.Y. 2006-07 was completed at assessed income of Rs. 41,33,070/- against the returned income of Rs. 23,68,116/-. During the previous year relevant to the assessment year, the assessee had sold three properties i.e. plot of Kalyan Colony on 12/01/2006 for Rs. 26,75,600/-, plot of Chitrakoot on 12/07/2005 for Rs. 8,50,000/- and agricultural land on 13/02/2006 at Rs. 1.5 crores. The long term capital gain was shown by the assessee at Rs. 34,74,458/- and claimed exemption U/s 54F for whole amount by investment in construction of house but on verification, the ld Assessing Officer found that the assessee had purchased another residential flat at 5-Kalyan Colony,Jaipur for Rs. 24,72,700/- on 11/05/2006 i.e. before the date of filing of return of income. No other deposits in capital gain account scheme had been made, therefore, ld Assessing Officer allowed proportionate exemption U/s 54F and calculated taxable long term capital gain at Rs. 17,64,952/-. The penalty proceeding U/s 271(1)(c) was initiated by the Assessing Officer for furnishing wrong particulars and concealment of income in respect of income of Rs. 17,64,952. A total penalty of Rs. 7,11,833 imposed on the assessee.
Contention of the Assessee
The ld counsel of the assessee submitted that the assessee was in bonafide belief that on the salary income in Bangkok due tax was deducted and paid there and he has not brought the income in India and therefore, the said salary income is not includible in the return of income being filed in India. The assessee voluntarily included the income in return filed u/s 153A when he was apprised of the correct legal position which was not known to him nor was the same brought to his notice by his counsel when he filed original return. Even though salary income was includible while determining total income in India yet he was entitled to credit of taxes paid thereon in Bangkok in accordance with provisions of Section 90 and same was also allowed in assessment made. Thus a nominal tax effect was there and, therefore, assessee could not be expected to suppress dishonestly the said salary income from his return. The inadvertent error of law was occurred due to not being aware of law and because of not getting proper advice from the counsel who filed the return.
He further submitted that as regards to disallowance of deduction u/s 54F, it is submitted that assessee had capital gains during the year totaling to Rs. 34,74,458/- on net sales consideration of Rs. 50,25,600/- as per details given in assessment order. The sale consideration and capital gain was correctly disclosed in return filed giving full particulars and the same was accepted by A.O. in assessment. The assessee also made investment of Rs. 50,25,600/- i.e. total net sale consideration in construction of a new house during the year itself and the same has also been found correct by A.O. in assessment. The assessee on these facts claimed deduction u/s 54F, in respect to whole of capital gains worked out for the year under assessment. However the assessee was unaware of the clause (b) of proviso to section 54F (1) that he should not purchase any residential house other than the new asset (House under construction) within a year after the date of transfer of original assets giving rise to capital gain during the year. The assessee apart from investing in construction of new house as above purchased a residential flat for Rs. 24,72,700/- which was in violation of said clause (b) of provision to Section 54F (1). Thus on these facts in law the assessee could entitled for proportionate deduction of purchase of a new house i.e. for Rs. 24,72,700/- in place of his investment in construction of a new house amounting to Rs. 50,25,600/-. This led to disallowance of claim of deduction u/s 54F by assessee to the extent of Rs. 17,64,952/- as worked out in assessment order.
He further submitted that it will be thus found that both addition/disallowance occurred in assessment due to bonafide errors of law on the part of assessee and there is neither non-disclosure of full particulars nor there was any fraudulent or bogus claim. Even if some deduction or benefit is claimed by the assessee wrongly but bona fide and no mala fide can be attributed, the penalty would not be levied. The support is derived from the judgement of Apex Court in case of K.C. Builders Vs. ACIT (2004) 265 ITR 562 (SC) and CIT Vs. Skyline Auto Products P. Ltd. (2004) 271 TIR 335.
Contention of the Revenue
The ld counsel of the revenue supported the order of CIT (A).
Held by CIT (A)
CIT (A) confirmed the addition. It was held that submission of the appellant cannot be accepted and treated as genuine inasmuch as, the appellant is regularly assessed to tax, deriving income from business and profession, the accounts are audited by Chartered Accountants and the appellant is assisted by taxation experts on regular basis. In this background it cannot be believed that such wrong claim were made and salary income was not shown due to ignorance of law and in fact such omission cannot said to be unintentional or bonafide. Though it is correct that the basic facts relating to these two issues are shown by the appellant but the fact remained that income was evaded by way of wrong claim of deduction U/s 54F and not shown the salary income in India whereas the same was taxable. The important issue to be noted is that such admission of income during the assessment proceedings and in the return filed subsequent to search in respect of salary income was never voluntary and it was only when the issue of concealment was detected by the A.O. during the assessment proceedings that the assessee agreed for such additions.
It is a settled law that simply because assessee agreed to addition of concealed income after detection thereof by the department then assessee cannot escape from imposition of penalty U/s 271(1)(c) of IT Act. Reliance is placed on the following case laws: CIT Vs. Rakesh Suri 331 ITR 458 (All) and CIT Vs. Sushma Devi Agarwal 67 DTR 430 (ITAT, Kolkatta). It may further be stated that willful concealment is not an essential ingredients for attracting and imposing penalty as the penalty under fiscal statutes are for breach of civil liabilities.
Held by ITAT
We find that the argument of the assessee that the assessee had disclosed salary received from RMC Gems Thai Co. Ltd., Bangkok voluntarily has not substantiated with any evidence. The Assessing Officer issued notice U/s 153A to file the return in response to survey proceedings. Thereafter, the assessee has disclosed the salary received in Thai Bhat in Bangkok in global income. Similarly the excess claim of exemption U/s 54F had also not been revised even notice U/s 153A was issued to the assessee. The assessee was availing expert opinion on taxation matter as he was filing return since long and had number of businesses. Therefore, the assessee’s claim that he was ignorant about legal position of salary received in Bangkok and second house purchased during the year under consideration and claimed deduction U/s 54F by not disclosing the facts of the another house purchased in the return, proved that the assessee’s action was not bonafide. We have considered view that the assessee has concealed the particulars of income and furnished inaccurate particulars of income.
The case laws relied by the ld CIT(A) CIT Vs. Rakesh Suri 331 ITR 458 (All) is squarely applicable wherein the Hon’ble Court has held that the assessee has concealed the material fact and give incorrect statement of fact in the application and also not provided information required by the Assessing Officer after receipt of notice. Accordingly, action of the assessee was neither bonafide nor voluntary, therefore, penalty is liable. The other case laws also on mens rea is applicable as referred by the ld CIT (A) in his order. The Hon’ble Supreme Court in the case of Mak Data Pvt. Ltd. Vs. CIT (2013) 358 ITR 593 held that Explanation 1 to section 271(1)(c), raises a presumption of concealment, when a difference is noticed by the Assessing Officer, between the reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. Voluntary disclosure does not release the 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 has to be absolved from penalty. Therefore, we have considered view that the CIT (A) was right to confirm the penalty on given circumstances
Accordingly appeal of the assessee dismissed.