Case Law Details
Shri Himanshu Prafulchandra Varia Vs DCIT (ITAT Ahmedabad)
We find merit in the contention of the Ld. Counsel for the assessee that the failure to disclose the income was by mistake and not deliberate and the assessee had in fact come clean during assessment proceedings before the Revenue authorities even before detection by the Revenue. In fact, the facts on record reveal that the assessee could not have possibly disclosed this income in its return originally filed since the survey action, during the course of which the income was surrendered, took place subsequent to the filing of return of income by the assessee. The return for the impugned year had been filed on 31.07.2010, while the survey proceedings were conducted on the assessee on 06.08.2010. Therefore the question of disclosure of the income surrendered income by the assessee during survey in the return of income originally filed u/s 139(1) of the Act, does not arise at all. There was no possibility of disclosing the same in his original return. The assessee could very well have disclosed this income in a revised return subsequently, , but it is not highly improbable that having already filed a return of income, he by mistake failed to take the logical step of filing a revised return .Further it is a fact on record that when the assessment proceedings were initiated, even before the Revenue could confront him with the fact of nondisclosure of the undisclosed income in his return of income filed, the assessee on his own, suo moto, disclosed the same by way of a revised return filed, though belatedly.
Considered in the backdrop of the aforestated facts and circumstances, the entire conduct of the assessee vis a vis the disclosure of the surrendered income for taxation appears bonafide and above board. The surrender having been made after the filing of return of income for the impugned year, the assessee clearly forgot disclosing the same by way of a revised return and on commencement of assessment proceedings, at the first and earliest opportunity, realizing his mistake, he disclosed the same by way of filing a revised return. There is nothing to show that the disclosure was made on detection by the Revenue.
The assessee, we hold, had bonafidely failed to disclose the surrendered income and therefore it is clearly not a fit case for levy of penalty u/s 271(1)(c) of the Act.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-8, Ahmedabad, (in short referred to as CIT(A)), dated 25-01-2017, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2010-11 for confirming levy of penalty u/s. 271(1)(c) of the Act.
2. The ground raised by the Assessee reads as under:
1. The Id. CIT(A) has erred in law and on facts in confirming the penalty u/s. 271(l)(c) of the Act of Rs. 17,75,820/- without proper appreciation and consideration of facts of the case and submissions filed. In view of facts and submissions filed coupled with settled legal position, the impugned penalty of Rs. 17,75,820/ u/s. 271(l)(c) requires to be cancelled / annulled.
1.1 The Id. CIT(A) has further erred in not appreciating the fact that in the revised computation of total income filed during the course of assessment proceedings, the appellant has already included the undisclosed income of Rs. 59,19,500/- which was accepted in the statement recorded u/s. 131 of the Act but by oversight and inadvertent mistake, was left out to be included in the original return of income filed by the appellant. Since there is neither furnishing of inaccurate particulars of income nor concealment of income while taking into consideration the revised computation of total income, the penalty u/s. 271(l)(c) of the Act of Rs. 17,75,820/- levied by the AO and confirmed by the Ld. CIT(A) is unjustified and unsustainable at law.
2.1 As transpires from the orders of the authorities below, penalty, in the present case, u/s 271(1)(c) of the Act, for concealment /furnishing of inaccurate particulars of income, has been levied on the addition made to the income of the assessee of Rs. 59,19,500/-, being on- money paid in cash for purchase of land which was surrendered by the assessee during survey proceedings.
3. The facts leading to the imposition of penalty are that for the impugned assessment year return of income was filed by the assessee declaring total income of Rs. 35,63,712/- on 31.07.2010. Subsequently on 06.08.2010 survey proceedings were conducted by the Investigation Wing of the Department in the case of the assessee during the course of which it was noticed by the officers conducting the survey that the assessee had paid on- money in cash of Rs. 59,19,500/- for purchase of land. In the statement recorded during survey proceedings of the assessee, the same was surrendered as his unaccounted income. Thereafter during assessment proceedings, the assessee filed a revised return disclosing the said income in his return of income. However, since the revised return was filed beyond the time limit prescribed u/s. 139(5) of the Act, a show notice was issued to the assessee as to why the said income be not added as his unaccounted income . The assessee contended that the failure to disclose the same in his original return was on account of bonafide mistake and that therefore suo moto and voluntarily he had filed the revised return including the unaccounted income in the same and had also paid taxes thereon. The A.O. however rejected the revised return filed by the assessee and made addition of the said admitted unaccounted income to the original return filed by the assessee, as Income from Other Sources. He thereafter initiated proceedings for the levy of penalty on the same also u/s. 271(1)(c) of the Act. During penalty proceedings, the assessee reiterated his contention of bonafide mistake, which was not accepted by the A.O. and penalty levied on the same amounting to Rs. 17,75,850/- being 100% of the tax sought to be evaded on the same.
4. The Ld. CIT(A) upheld the order of the A.O. stating that the disclosure by the assessee in the revised return only after detection by the department and therefore the assessee could not be saved from the levy of penalty. He relied upon the decision of the Hon’ble Apex Court in the case of Prasanna Dugar vs. CIT (2016) 70 taxmann.com 175 (SC). The relevant findings of the Ld. CIT(A) at para 5 of his order are as under:
5. Appellate findings :
The assessment order, order of CIT(A), penalty order and the submission filed by the appellant has been carefully considered. The A.R. of the appellant has argued that on agreed additions / disallowances , no penalty u/s. 271(1)(c) of the Act can be levied for furnishing of inaccurate particulars of income or concealment of income. He has further argued that the non disclosure of Rs.59,19,500/- was under bona fide mistake and has been considered and offered in the revised computation of income filed by the appellant during the course of assessment proceedings.
The submission of the appellant is not at all acceptable. The contention that the income of Rs.59,19,500/- was not included in the return of income under bona fide mistake and the revision of computation of income during the assessment proceedings is voluntary , is WRONG. It is recorded fact that a survey u/s. 133A of the Act was conducted in the appellant’s case on 06/08/2020 i.e. after the appellant filed the return of income on 31/07/2010. During the survey, the appellant accepted the amount to be his undisclosed income. This fact itself makes it clear that the appellant deliberately conceal this income by not showing in the return of income.
Since , the assessee has not offered the income voluntarily in the original return of income u/s. 139(1) and the income accepted through revised computation is only after detection by the department and cannot be defined as voluntary filing of return and penalty levied u/s. 271(1)(c ) is justified. Hon’ble Supreme Court in the case of Prasanna Dugar v. Commissioner of Income-tax (2016) 70 taxmann.com 175(SC) in its order dated May 1, 2015 decided.
” Section 271(1)(c ) , read with section 69 of the Income-tax Act, 1961 – Penalty – for concealment of income – Assessment year 2008-09 – In course of search , assessee made voluntary disclosure of Rs. 6 crores even though no incriminating document suggesting any such undisclosed income was found – On basis of said disclosure ,assessee filed a return , offering for taxation a sum of Rs. 70 lakhs – High Court by impugned order held that penalty levied under section 271(1)(c ) was justified – Whether Special Leave Petition filed against impugned order was to be dismissed – Held, yes (Para 2) (In favour of revenue) “.
The order of Hon’ble High Court of Calcutta which has been confirmed by Hon’ble Supreme Court decided that even where subsequent to search, assessee voluntarily disclosed a sum and offered said sum to tax. Since said amount was not disclosed in original return, penalty levied under section 271(1)(c ) justified. For ready reference the order of Hon’ble High Court of Calcutta (2015) 59 taxmann.com 99 (Calcutta) Commissioner of Income-Tax v. Prasanna Dugar ITAT no. 158 of 2014 GA no. 3171 of 2014 dated January 7, 2015 is reproduced as under:
” Section 271(1)(c ), read with section 69 , of the Income-tax Act, 1961 – For concealment of income ( Voluntary disclosure ) -Assessment year 2008-09 – In course of search , assessee made voluntary disclosure of Rs, 6 crores even though no incriminating document suggesting any such undisclosed income was found – On basis of said disclosure , assessee filed a return , offering for taxation a sum of Rs.70,000/- earned during current year whether since assessee had not given any statement under pressure and he did not want to rectify or modify statement made by him , imposition of penalty for non-disclosure of impugned amount in original return was just – Held, yes ( Paras 6, 7 and 8 ) In favour of revenue ) Judgment:
1. The appeal is directed against an order dated April 30, 2014 , by which the learned Tribunal allowed an appeal preferred by the assessee challenging an order passed by the Commissioner of Income-tax (Appeals) affirming the order of penalty passed under section 271(1)(c) of the Income-tax Act , 1961. Aggrieved by the order of Tribunal, the Revenue has come up in appeal.
2. After hearing the learned counsel for both the parties, it appears that the undisputed facts are as follows :
3. A search was conducted on February 3, 2009. During the search, the assessee disclosed certain facts which have been recorded in the order of the appellant authority which reads as follows :
” The facts of the above case are that a search under section 132 was conducted at the premises of the assessee on February 3, 2009. In case of search, the assessee made voluntary disclosure under section 132(4) disclosing a sum of Rs.6 crores even though no incriminating document suggesting any such undisclosed income was found. The said disclosure , as per the said deposition of the assessee recorded under section 131 was bifurcated into 3 persons, i.e. of Rs.3,50,00,0007-was disclosed in the name of the assessee. Rs.2,25,00,000/- was disclosed in the name of the assessee’s wife. Smt. Rajshree Dugor, and Rs.25,00,OOO/- was disclosed in the name of the limited company. Viz. Indian Gem and Jewellery (Imperial) Pvt. Ltd. in which the assessee had substantial interest. It may be repeated that no concealed income was established from any of the papers and documents found in the course of search in the panchnama of the assessee or in other panchnamas. The entire disclosure was made voluntarily and in good faith which is apparent from question and answer No.22 in the statement recorded under section 131 wherein the assessee categorically states that he is voluntarily disclosing the income even though no incriminating documents have been found and all the purchases and sales are correctly recorded and the disclosure was made just to cover the papers and documents which he may not be able to explain. The assessee bifurcated his own disclosure of Rs.3.50 lakhs in two parts, i.e. Rs.70,00,000/- for the assessment year 2008-09 and Rs.2.80 lakhs for the assessment year 2009-10. “
4. On the basis of the disclosure , the assessee filed a return on March 31, 2010, offering a sum of Rs.70,00,000/- for taxation earned during the assessment year 2008-09, It is not in dispute that for the assessment year 2008-09 , the assessee had earlier filed his return in which the aforesaid sum of Rs.70,00,000/- was not disclosed. The case of the assessee, as such, came squarely within the provision of section 271 (1)(c) of the Income-tax Act.
5. The assessing Officer passed an order of penalty, as indicated earlier, which was affirmed by the appellant authority. The Tribunal interfered with the order of the appellate authority on the basis of a judgment of the Appellate Tribunal, ‘Mumbai, in the case of ITO(Central) v. Gope M. Rochalani ( IT Appeal No. 7737 (Mum) of 2011, dated 24.05.2013 ). The aforesaid judgment , Mr.Khaitan Submitted has to be read in conjunction with clause (b) of Explanation 5A to section 271(1), which provides as follows : .
” (b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return “
6. The aforesaid clause, we are inclined to think is not applicable to the case of the assessee for the simple reason that it is not the case of the assessee that he had not filed return for the assessment year 2008-09, clause (b) quoted above, according to us , shall not apply to those cases where the assessee has filed a return but did not disclose the income as in this case. His case shall be covered by clause (a), which provides as follows :
” (o) Where the return of income for such previous year has been furnished before the said date but such income has not been declared therein “
7. The Tribunal, as such, fell into an error in proceeding on the basis that the assessee is entitled to get the benefit / immunity under clause (b) quoted above. The Tribunal also appears to have for the purpose of interfering with the order of the appellate authority relied upon its own judgment in the case of Ajit kumar Surana v. Asstt. CIT (IT Appeal Nos. 835 & 836 (Kol) of 2013, dated 19.06.2013) which, even Mr.Khaitan did not dispute has no manner of application of the facts and circumstances of the instant case. In the case of Ajit kumar Surana, there was no search and seizure. In the case before us there was, in fact, a search and seizure on February 3, 2009. During the search and seizure, the disclosure was made on February 3, 2009. During the search and seizure, the assessee made a statement which was recorded by the officers of the Revenue. Stress was laid by the Tribunal on the expression “voluntary” but the Tribunal failed to understand that the meaning of the expression “voluntary” in the context is that the statement made by him was not extorted from him by applying force. It is in that sense voluntary disclosure which has been clarified by the assessee by stating in answer to question No.23 that he had not given any statement under pressure and he want to rectify the statement made by him.
8. For the aforesaid reasons, we are of the opinion that the order of the Tribunal is unsustainable in law and therefore is set aside. The order of the appellate authority is therefore restored.
9. The appeal and the applications are thus disposed of;
The above mentioned case of Prasanna Dugar, the assessee filed a return offering sum of Rs.70 Lacs on the basis of disclosure search. This amount was not disclosed in his original return and the Hon’ble Supreme Court pronounced finding that disclosure made after detection by the department cannot be treated as voluntary and is liable for penalty u/s. 271(1)(c).
In the case of present appellant , the facts are much crystal clear to be covered for the purpose of penalty u/s. 271(1)(c ) as the appellant filed the return without disclosing the said income of Rs.59,19,500/- and tried to save himself by submitting a revised computation during assessment proceedings. The facts clearly established that the appellant i has concealed the income deliberately and the A.O. has rightly imposed the penalty u/s. 271(1)(c ). The case laws quoted by the appellant in its submission are of no help to the appellant as those are not applicable to the facts of the case of the appellant. Hence, relying on the clear and undisputed facts of the case supported by the order of Hon’ble Supreme Court in the case of Prasanna Dugar ( supra) the penalty imposed by the A.O. is confirmed and the appeal is dismissed.
In result, the appeal is dismissed.
5. We have heard both the parties.
5.1. The case of the assessee against the levy of penalty is that the nondisclosure of the surrendered income in the original return was bonafide mistake and the same had been disclosed suo moto by the assessee even before detection by the Revenue and therefore there was no case for levy of penalty. The Revenue on the other hand has argued otherwise, that there was no bonafide mistake and the disclosure was only on detection by the Revenue.
6. On going through the orders of the authorities below and considering all the facts mentioned therein, we find merit in the contention of the Ld. Counsel for the assessee that the failure to disclose the income was by mistake and not deliberate and the assessee had in fact come clean during assessment proceedings before the Revenue authorities even before detection by the Revenue. In fact, the facts on record reveal that the assessee could not have possibly disclosed this income in its return originally filed since the survey action, during the course of which the income was surrendered, took place subsequent to the filing of return of income by the assessee. The return for the impugned year had been filed on 31.07.2010, while the survey proceedings were conducted on the assessee on 06.08.2010. Therefore the question of disclosure of the income surrendered income by the assessee during survey in the return of income originally filed u/s 139(1) of the Act, does not arise at all. There was no possibility of disclosing the same in his original return. The assessee could very well have disclosed this income in a revised return subsequently, , but it is not highly improbable that having already filed a return of income, he by mistake failed to take the logical step of filing a revised return .Further it is a fact on record that when the assessment proceedings were initiated, even before the Revenue could confront him with the fact of nondisclosure of the undisclosed income in his return of income filed, the assessee on his own, suo moto, disclosed the same by way of a revised return filed, though belatedly.
7. Considered in the backdrop of the aforestated facts and circumstances, the entire conduct of the assessee vis a vis the disclosure of the surrendered income for taxation appears bonafide and above board. The surrender having been made after the filing of return of income for the impugned year, the assessee clearly forgot disclosing the same by way of a revised return and on commencement of assessment proceedings, at the first and earliest opportunity, realizing his mistake, he disclosed the same by way of filing a revised return. There is nothing to show that the disclosure was made on detection by the Revenue.
The assessee, we hold, had bonafidely failed to disclose the surrendered income and therefore it is clearly not a fit case for levy of penalty u/s 271(1)(c) of the Act. The penalty so levied of Rs.17,75,820/-is therefore directed to be deleted.
8. In effect appeal filed by the Assessee is allowed.
Order pronounced in the open court on 22-06-2022
