Income Tax Appellate Tribunal - Chennai
S.Sathyanarayanan, Chennai vs Acit, Chennai on 20 August, 2019
आयकर अपील य अ धकरण, 'ए'' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH : CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं
ी इंटूर रामा राव, लेखा सद य के सम
[BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER]
आयकर अपील सं./I.T.A. Nos.754, 755 & 756/CHNY/2015
नधारण वष /Assessment years : 2000-01, 2001-02 & 2007-08.
S. Sathyanarayanan, Vs. The Assistant Commissioner of
Old No.19, New No.45, Income Tax,
Giriappa Road, Central Circle I(5) (i/c)
T. Nagar, Chennai 600 034.
Chennai 600 017.
[PAN ABCPS 0844B]
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ# क$ ओर से/ Appellant by : Shri. S. Sridhar, Advocate
&'यथ# क$ ओर से /Respondent by : Shri. AR.V. Sreenivasan, JCIT.
सन
ु वाई क$ तार ख/Date of Hearing : 01-08-2019
घोषणा क$ तार ख /Date of Pronouncement : 20-08-2019
आदे श / O R D E R
PER INTURI RAMA RAO, ACCOUNTANT MEMBER
These are appeals filed by the assessee directed against different orders of the ld. Commissioner of Income Tax (Appeals)-19, :- 2 -: ITA Nos.754 to 756/2015 Chennai (in short ''the CIT(A)'') dated 30.12.2014 for assessment years 2000-01, 2001-02 and 2007-08 respectively.
2. Since, the identical facts and issues are involved in these appeals, we proceed to dispose the same vide this common order.
3. For the sake of convenience and clarity the facts relevant to the appeal in ITA No.754/Chny/2015 for assessment year 2000-2001 are stated herein.
4. The Assessee raised the following grounds of appeal:
1. The order of the learned Commissioner of Income Tax (Appeals) is opposed to law and facts of the case.
2. The learned Commissioner of Income tax (Appeals) erred in confirming the penalty of Rs.5,57,301/-levied U/s 271 (1) (C) of the Act.
3. This was a search case and in the course of search operations, the appellants father had admitted that the entire income had arisen from the real estate operations and offered the entire income and also to pay the taxes there on in his hands as also other family members and the company. In fact over 2.5 crores of taxes were paid even before the completion of Assessment and the fact that the same is not denied by the Assessing Officer proved the Appellant's bona fides. The learned assessing officer had himself observed in the penalty order that "the assessee admitted a undisclosed income in the course of search and paid tax on such undisclosed income". Since material facts concerning undisclosed income were disclosed in the course of search proceedings and substantial tax was also paid, the appellant satisfies the conditions laid down in the Explanation (5) to section 271 (1) (C) of the Act.:- 3 -: ITA Nos.754 to 756/2015
4. The learned Commissioner of Income Tax erred in relying on the Supreme Court's decision in the case of Mak data Pvt Limited since it was a case where the assessee did not come out with full disclosure even after 10 months of survey proceedings in the case of the sister concern.
5. The two conditions laid down under the Explanation (1).
to 271 (1) (C) are fully satisfied by the appellant in that for each and every addition in the appellant gave his explanation which was bonafide.
6. Since the appellant made a full disclosure even in the course of search proceedings and the additions made in the assessment were due to only mistakes committed in the computation of the correct concealed income, the supreme court decision in the case of CIT VS Suresh Chandra mittal 251 ITR page 9 alone applied to the facts of the case.
7. For the above and such other grounds, as may be adduced with the permission of the Honourable income Tax Appellate Tribunal, it is prayed that the Appeal may be allowed and Rs. 5,57,031/- penalty levied may be deleted''.
5. The brief facts of the case are as under:
The appellant is an individual engaged in the business of real estate. There was search and seizure operations conducted in the case of Shri. K. Sundarraj, who is the father of the appellant on 21.09.2005 and during the course of search, certain alleged incriminating materials were stated to have been seized.
Consequently, notice u/s.153C of the Act was issued to the assessee on 28.08.2006. In response to such notice, the return of income for :- 4 -: ITA Nos.754 to 756/2015 the assessment year 2000-01 was filed on 26.03.2007 disclosing total income of Rs. 23,38,865/-. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income Tax, Central Circle-I(5), (Addl. Charge) Chennai vide order dated 31.12.2007 passed u/s. 143(3) r.w.s 153C of the Act at total income of Rs.44,04,489/- after making the following additions:-
''Agricultural Income : 1,77,250/- Unexplained Investment in Pallangi Village : 2,96,120/- Unexplained Investment in Vyasarpadi : 20,99,850/- Building Unexplained Investment In Kodaikanal : 1,50,000 Unexplained Investment in Vilpatti Village : 25,445/ Unexplained investment in Bank : 3,00,000/- Long Term Capital Gain : 10,92,758/-
The Assessing Officer initiated penalty proceedings u/s.271 (1) (c) of the Act by issuing show cause notice u/s.274 r.w.s. 271 (1) ( c) of the Act. In response to the same, the appellant had filed explanation vide letter dated 29.05.2008 which is extracted by the Assessing Officer at para 3 of the penalty order. The sum and substance of the explanation offered by the assessee in respect of addition No.1 & 3 are that the :- 5 -: ITA Nos.754 to 756/2015 assessed income has been offered as undisclosed income and therefore levy of penalty were not justified. The Assessing Officer considering the explanation held that long term capital gains arising on sale of land at Pallangi Village, was not disclosed in the original return of income or in the return of income filed in response to notice issued u/s.153C of the Act. The assessee could not prove that capital gains had arisen prior to 01.04.1999. In the case of alleged unexplained investments in land at Kodaikanal , the Assessing Officer further observed that the appellant had not fulfilled the condition stipulated to avail the benefit of immunity from the imposition of penalty proceeding provided in Explanation (5) to Section 271 (1) ( c) of the Act and therefore proceeded to levy penalty u/s.271 (1) (c ) of the Act vide order dated 16.06.2008 at K5,57,301/-.
6. Being aggrieved by levy of penalty, the assessee preferred an appeal before ld. CIT(A), who vide impugned order dismissed the appeals of the assessee for assessment years 2000-01 and 2001-02.
7. Being aggrieved by the above decision of the CIT(A), the appellant is in appeal before us in the present appeals. It is submitted before us that assessee admitted undisclosed income during the course of search and paid tax on such undisclosed income and therefore levy of penalty is not warranted and he also placed reliance :- 6 -: ITA Nos.754 to 756/2015 on the decision of Hon'ble Supreme Court in the case of CIT vs. Suresh Chandra Mittal, 251 ITR 9. He further contended that the ld. CIT(A) ought not have upheld the decision of Hon'ble Supreme Court in the case of MAK Data (P) Ltd vs. CIT, 38 taxmann.com 448. Further, he submitted that relevant column in the show cause notice was not struck off, therefore he filed the additional grounds of appeal, wherein it was stated as under:-.
''1. The CIT(A) erred in sustaining the levy of penalty u/s 271(1)(c) of the Act for the Assessment Year under consideration despite the wrong initiation of the proceedings in the show cause notice dated 31.12.2007 by the Assessing Officer without assigning proper reasons and justification.
2. The CIT(A) failed to appreciate that the lack of precise charge within the scope of section 271(1)(c) of the Act as to whether the penalty was leviable for concealment of income or furnishing inaccurate particulars of income while initiating the penalty proceedings in issuing the show cause notice would vitiate the consequential penalty order under consideration and accordingly ought to have appreciated that the order imposing penalty u/s 271(1)(c) of the Act should be reckoned as invalid in the eyes of law''.
Ld. Authorised Representative further submitted that the additional grounds of appeal are purely legal in nature and goes to the root of the matter and therefore the same must be admitted in the light of the law laid by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd vs. CIT, 229 ITR 383. Further, it is submitted :- 7 -: ITA Nos.754 to 756/2015 that the show cause notice is not clear whether notice is for concealment of income or furnishing inaccurate particulars of income. Therefore, the assessee was not sure of the charge made against him and in the light of the decision of Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory, 359 ITR 565, which was affirmed by the Hon'ble Supreme Court in the case of SSA's Emerald Meadows in CC No.11485 of 2017 dated 05.08.2016 by dismissal of the SLP citing the above circumstances, ld. Authorised Representative prayed for squashing of penalty proceedings.
8. Considering the submissions made by the assessee, the additional grounds of appeal are admitted for adjudication. The ratio of the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra) is not applicable to the facts of the present case as in the present case, the assessee had offered explanation in response to show cause notice having fully understood the show cause notice. Further, the Bangalore Bench of the Tribunal in the case of P.M.Abdulla vs. ITO (in ITA Nos.1223 & 1224/Bangalore/2012, dated 17.10.2016) had held that this cannot be a valid reason for deletion of the penalty u/s.271(1) (c) of the Act by holding as under:-
:- 8 -: ITA Nos.754 to 756/2015
''9. We heard rival submissions and perused material on record. The only issue involved is whether levy of penalty u/s.271(1) ( C) is valid in law keeping in view the decision of the Jurisdictional High Court in the case of Manjunatha Cotton &Ginning Factory (supra). The contention of the assessee is that since the Assessing Officer had not ticked off the relevant column in the show cause notice, it goes to prove that the Assessing Officer had not reached satisfaction before initiating proceedings u/s.271(1) ( c). The contention of the learned Counsel for assessee that the relevant column has not been ticked, cannot be accepted as it is found from material placed before us that for both the years, the column relevant to concealment of particulars of income has been ticked by the Assessing Officer. In any event, it is found that the assessee had offered an explanation for concealment of particulars of income only. The assessee, at no stage of penalty proceedings and at no stage had complained of violation of the principles of natural justice. Thus, no prejudice is caused on account of any omission or commission in the show cause issued. The provisions of Section 292B clearly lay down that :-
"' Return of income, etc, not to be invalid on certain grounds:
292B:- No return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.
The Hon'ble Jurisdictional High Court had neither considered nor brought to the notice of the Hon'ble High Court, provisions of Section 292B of the Act. Even assuming that there is a defect in the show cause notice issued, as canvassed by the learned Counsel for assessee that will vitiate the entire penalty proceedings, the judgment was rendered by the Hon'ble High Court in the case of Manjunatha Cotton & Ginning Factory (supra) without considering the provisions of Section 292B. Subsequently, the Hon'ble Jurisdictional High Court in the case of CIT vs. Sri Durga Enterprises (2014) 44 taxmann.com 442 (Kar) while dealing with the validity of notice u/s.148 of the Act as valid and responded to it in letter and spirit and participated in the proceedings and in light of the provisions of :- 9 -: ITA Nos.754 to 756/2015 Section 292B, notice issued u/s.148 was held to be valid. The relevant paragraph of judgment is extracted below:-
9. In the present case, as observed earlier, the assessee not only responded to the notice under Section 148 of the Act within one month, but on the basis of the return filed earlier, participated in the proceedings till the matter reached the FAA and was disposed of. A glance at Section 292B of the Act, shows that under this provision, certain Acts are not to be treated as invalid, may be by reason of any mistake, defect or omissions, either in return of income, assessment, notice, summons or other proceedings. In other words, a notice cannot be invalidated by reason of any mistake, such as the one occurred in the present case, namely, the period of filing return of income was not specified as contemplated by Section 148 of the Act. If such a defect is not allowed to be cured, or treated as invalid so as to declare the notice invalid, despite the fact that assessee had taken that notice as valid and responded to it in letter and spirit and participated in the proceedings, the very purpose/objective of the provisions contained in Section 292B of the Act would stand frustrated/defeated. The intent of the Legislature is clear from the language employed in this provision which states that a defective notice, such as the one in the present case, cannot be declared invalid by reason of any mistake, defect or omission, if the notice in `substance' and in `effect' is in conformity with or according to the intent of purpose of this Act. The intent or purpose of issuing the notice is to call upon the assessee to file return, if the Assessing Officer finds that income has escaped the assessment. This being the intent and purpose of the provisions contained in Section 148 of the Act, in our opinion, it stands satisfied if the notice is responded within reasonable time, which in the present case was 30 days, irrespective of the fact whether the period was specified or not in the notice for filing return of income. In the present case, if the assessee had not responded to this notice at all and had raised such ground of challenge, perhaps, he would not succeed. But having responded and participated in the proceedings, he cannot be allowed to turn around and raise objection for the first time before the Tribunal seeking invalidation of the proceedings initiated by issuing notice under Section 148 of the Act. In the circumstance, we allow this appeal answering both the substantial questions of law in favour of the Revenue and against the assessee. In view of the :- 10 -: ITA Nos.754 to 756/2015 peculiar facts and circumstances of the case, there shall be no order as to costs.
Thus, having regard to the ratio laid down by the Hon'ble Jurisdictional High Court in the subsequent decision in the case of Sri Durga Enterprise (supra) we hold that show cause notice issued u/s.274 r.w.s 271(1) ( c) cannot be held to be invalid''. Further, the Hon'ble Supreme Court in the case of Kantamani Venkata Narayana and Sons vs. First Additional Income Tax Officer, Rajamundhry, (1967) 63 ITR 638 had held that mere mistake in the show cause notice does not render the show cause void null and void. Furthermore, mere dismissal of the SLP does not mean laying down law by the Hon'ble Supreme Court and therefore the decision of Hon'ble Supreme Court in the case of Kantamani Venkata Narayana and Sons (supra) prevails over the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra). Thus, in the light of the legal positions enumerated above, the additional grounds of appeal filed by the assessee are dismissed.
9. Coming to the merits of levy of penalty, admittedly, undisclosed income was returned in response to notice issued u/s.153C of the Act and additions in respect of capital gains made in the assessment proceedings for investment made in land at Pallangi Vilage and Vysarpadi Building. The immunity contemplated under unexplained investment is applicable only in the case when if the :- 11 -: ITA Nos.754 to 756/2015 amount found during the search is surrendered and tax with interest is paid and the assessee had disclosed the manner in which he had derived undisclosed income. In the present case, admittedly, assessee had only paid taxes partly and all the assessed income was also not disclosed in the return of income. Therefore, it can be said that assessee had failed to fulfill the requirement of the explanation (5) to Section 271 (1)(c) of the Act and levy of penalty is valid as held by Hon'ble Punjab and Haryana High Court in the cases of Surender Paul vs. CIT, (2006) 287 ITR 223 and Ashok Kumar Gupta vs. CIT, 287 ITR 376. In the result, the appeal of the assessee in ITA No.754/CHNY/2015, for assessment year 2000-2001 is dismissed. ITA No.755/Chny/2015, for Assessment Year 2001-2012
8. Since, the facts in the present appeal is identical to the facts in ITA No.754/Chny/2015, for assessment year 2000-2001 for the reasons mentioned therein, we dismiss the appeal on the above lines indicated in appeal ITA No.754/Chny/2015 supra. Hence, the above captioned appeal filed by the assessee is dismissed.
10. In the result, the appeal of the assessee in ITA No.755/CHNY/2015, for assessment year 2001-2002 stands dismissed. :- 12 -: ITA Nos.754 to 756/2015
11. Now, we take up appeal of the assessee in ITA No.756/CHNY/2015, for assessment year 2007-2008 for adjudication.
12. The assessee raised the following grounds of appeal:-
''1.The order the learned Commissioner of Income tax (Appeals) is opposed to law and facts of the case.
2. In the return originally filed under section 139 (4) of the Act the appellant admitted a capital gains of 54,43,464. In the course of assessment proceedings the appellant furnished a details before the Assessing Officer explaining that the correct capital gains were only 35,72,678. This was accepted by the assessing officer after due scrutiny of the evidence filed by the assessee.
The assessment was later reopened to include certain other capital gains amounting to RS.829680 and also a business income of Rs.686001 which the appellant included in the original return but which was omitted to be assessed by the then assessing officer. In the present assessment the learned assessing officer had revoked the decision taken by the Assessing Officer in the original assessment assessing the capital gains at Rs.35,72,678/-. In the reassessment the learned assessing officer had assessed the capital gains in respect of these assets at Rs.54,43,464/- as originally returned by the Appellant ignoring the fact that this part of assessment had become final in the original assessment after due scrutiny of the evidence produced by the Appellant in the original assessment.
The reason adduced by the assessing officer is that the appellant filed only a revised statement in the course of original assessment proceedings and no revised return was filed is not an issue in the re assessment proceedings.
3.The learned Commissioner of Income Tax (Appeals) erred in confirming the assessment made by the assessing officer assessing the capital gains at Rs.54,43,464/- as against the correct capital gains of Rs.44,02,358/-.
:- 13 -: ITA Nos.754 to 756/2015
4.The learned assessing officer had conceded in the assessment order that the correct capital gains is only Rs.44,02,358/- but assessed the capital gains of RS.54,43,464/- on the ground that this was returned in the original return, ignoring the fact that the assessment of capital gains to the extent of 35,72,678 had become final in the original assessment and filing only a detailed statement and not a revised return happened in the course of original assessment proceedings and these are not relevant issues before the assessing officer in the re assessment proceedings.
5. For the above and such other grounds has may be adduced with the permission of the appellate tribunal, it is prayed that the appeal may be allowed''.
13. The brief facts of the case are as under:
The appellant is an individual engaged in the business of dealing in land. The original return of income for the AY 2007-08 was filed on 29.03.2008 disclosing total income of Rs. 74,45,470/- including capital gains. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income Tax, Central Circle- I(5) (i/c) Chennai vide order dated 30.12.2011 passed u/s.
143(3) r.w.s. 147 of the Income Tax Act, 1961 (for short 'the Act') at total income under normal provisions of K14,84,916/- and capital gains of K35,72,678/-. Subsequently, the Assessing Officer noticed from the statement filed by the assessee during the course of original assessment proceedings that assessee has revised statement showing capital gain at K44,02,358/-. Based on this, he formed an opinion that :- 14 -: ITA Nos.754 to 756/2015 the income assessable to tax has escaped assessment and issued notice u/s.148 of the Act on 30.03.2011. In response to notice, no return of income was filed by the assessee . However, revised return of income was filed on 14.12.2011, wherein profits and gains from business and profession of K6,86,001/- was shown. However, the Assessing Officer had not taken cognizance of return of income which was filed belatedly and proceeded with assessment by assessing the capital gains at K54,43,464/- as disclosed in the original return of income vide order dated 30.12.2011 passed u/s.143(3) r.w.s 147 of the Act.
14. Being aggrieved, an appeal was preferred before the ld. CIT(A), who vide impugned order dismissed the appeal placing reliance on the judgment of Hon'ble Supreme Court in the case of CIT vs. Sun Engineering Works (P) Ltd, 64 Taxman 442.
15. Being aggrieved by the order of the ld. CIT(A), the appellant is in appeal before us in the present appeal. It is contended that there was no reason to believe that income escaped assessment and therefore initiation of reassessment proceedings are not valid in law. Without prejudice to the above, the ld. Authorised Representative submitted that the Assessing Officer ought to have taken cognizance of revised statement of capital gains notwithstanding the fact that :- 15 -: ITA Nos.754 to 756/2015 revised return of income was filed beyond the due date stipulated under the Act.
16. On the other hand, the ld. Sr. Departmental Representative placed reliance on the orders of lower authorities.
17. We heard the rival submissions and perused the material on record. The revised statement of capital gains filed by the assessee during the course of original assessment proceedings shown the capital gains at K44,02,358/- enabled the Assessing Officer to form an opinion that income escaped assessment. Hence, we uphold the validity of reassessment proceedings.
18. Now coming to the issue on the merits of the addition, the Assessing Officer ought to have computed capital gains in accordance with law notwithstanding the fact that there is no valid revised return in response to notice issued u/s.148 of the Act. There is no bar to compute the income in accordance with law even in the absence of valid return of income. Therefore we remand this matter back to the file of the Assessing Officer for denovo assessment of capital gains in accordance with law.
:- 16 -: ITA Nos.754 to 756/2015
19. In the result, the appeal of the assessee in ITA No.756/CHNY/2015 for assessment year 2007-2008 is partly allowed for statistical purpose.
20. To summarize the result, the appeals of the assessee in ITA Nos.754 & 755/CHNY/2015 for assessment years 2000-2001 and 2001- 2002 stand dismissed whereas ITA No.756/CHNY/2015 for assessment year 2007-2008 is partly allowed for statistical purpose.
Order pronounced on 20th day of August, 2019, at Chennai.
Sd/- Sd/-
(एन.आर.एस. गणेशन) (इंटूर रामा राव)
(N.R.S. GANESAN) (INTURI RAMA RAO)
या यक सद य/JUDICIAL MEMBER लेखा सद य/ACCOUNTANT MEMBER
चे नई/Chennai
.दनांक/Dated: 20th August, 2019
KV
आदे श क$ & त0ल1प अ2े1षत/Copy to:
1. अपीलाथ#/Appellant 3. आयकर आय3
ु त (अपील)/CIT(A) 5. 1वभागीय & त न7ध/DR
2. &'यथ#/Respondent 4. आयकर आय3
ु त/CIT 6. गाड फाईल/GF