Income Tax Appellate Tribunal - Jaipur
Nirmal Kumar Bardia , Jaipur vs Assessee on 7 September, 2015
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM
vk;dj vihy la-@ITA No. 842/JP/2012
fu/kZkj.k o"kZ@Assessment Year : 2006-07
Nirmal Kumar Bardia, cuke Deputy Commissioner of
M/s Kalpataru Gems, Vs. Income Tax, Central Circle-2,
Ummaid Bhawan, Bara Jaipur.
Gangore Ka Rasta, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABAPB 9576 F
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri G.G. Mundra (C.A.)
jktLo dh vksj ls@ Revenue by : Shri Kailash Mangal (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 16/06/2015
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 07/09/2015
vkns'k@ ORDER
PER: BENCH This is an appeal filed by the assessee against the order dated 25/09/2012 passed by the learned CIT (A) Central, Jaipur for A.Y. 2006-
07. The sole ground of appeal is against confirming the penalty of Rs. 7,11,833/- U/s 271(1)(c) of the Income Tax Act, 1961 (hereafter referred as the Act).
2 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT
2. In this case as search seizure action U/s 132(1) and survey U/s 133A of the Act was carried out on 23/08/2007 at the residence and business premises located at 24, Bardiya Colony & 1507, Bara Gangore Ka Rasta, Johari Bazar, Jaipur and survey was conducted at branch office located at 109/114A, Trinity building, 76/78, Dhanji Street, Mumbai and K-5, Keshav Path, Jaipur 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 ld Assessing Officer observed that in this case, the assessment was completed U/s 153A read with Section 143(3) of the Act. 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 short the Rules). 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 3 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT 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 ld 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) of the Act was initiated for furnishing wrong particulars and concealment of income in respect of income of Rs. 3,53,599/- by the Assessing Officer. 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 4 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT 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/-.
2.1 The penalty proceeding U/s 271(1)(c) of the Act was initiated by the Assessing Officer for furnishing wrong particulars and concealment of income in respect of income of Rs. 17,64,952/-. Before imposing the penalty, the ld Assessing Officer gave show cause notice on 31/3/2009 and 24/08/2009. The assessee also replied vide letter dated 19/08/2009 and 31/08/2009. After considering the assessee's reply, the ld Assessing Officer held that salary of the assessee as claimed that he was under a bonafide belief that he declared his income from salary in his return of income in Thailand and paid tax thereon in Thailand then he would not 5 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT need to include the same in his return of income in India since tax on that income had already been paid in Thailand, was not found convincing to the Assessing Officer by considering the explanation-1 of Section 271(1)(c) of the Act, which may clear that when the Assessing Officer is satisfied that any person has concealed particulars of income or furnished inaccurate particulars of such income, or where in respect of any facts material to the computation of the total income of any person under this Act, such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer to the false, or such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the case of the assessee comes within the purview of Section 271(1)(c) of the Act. As per law, the assessee was required to give complete and true details of his income including all/any income arising to him outside India i.e. global income. However, the assessee failed to furnish such true and complete details of income by omitting to furnish details in respect of his salary income earned from RMC Gems Thai Co. Ltd., Bangkok. The ld 6 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT Assessing Officer further held that mistake of law is not excuse, ignorantia juris non excusat and anyone who commits it, does it at his own peril. The assessee had not brought on any material evidence on record to establish that the mistake was bonafide. Moreover, Section 271(1)(c) of the Act read with its explanation-1, does not talk of any particular intention or means rea for fastening penalty. If the actus of assessee falls within the four corners of the provisions of the said Section, the imposition of the penalty is independent of any mental state of the assessee and as such a claim of bonafide mistake of law does not come to his rescue. The ld Assessing Officer further held that the assessee had also claimed exemption U/s 54F was claimed excess on the basis of advice of the counsel of the assessee. The assessee has disclosed long term capital gain amounting to Rs. 50,25,600/- and same had been claimed invested in a residential property. However, the assessee actually invested Rs. 24,74,700/- and claimed benefit for the whole amount. The excess claim of the assessee amounting to Rs. 17,64,954/-, which was disallowed by the Assessing Officer in quantum addition. Now the assessee's reply is perfunctory and do not carry any weight by saying that the tax was paid on amount added back does not 7 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT absolve the assessee of the wrong committed by him. The ld Assessing Officer also considered the case law submitted before the Assessing Officer, which was found distinguishable from those of the said case laws and therefore, the ld Assessing Officer imposed penalty at Rs. 7,11,833, which is 100% tax sought to be evaded.
3. Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had confirmed the addition by observing as under:-
"6. I have carefully considered submission of the assessee, observation of the A.O. and other relevant issues relating to this case. It may be noted that two issues are involved where additions are made forming part of imposition of penalty.
i) Salary income from M/s RMC Gems Thai Co. Ltd.
Bangkok Rs. 353599/-
(ii) Disallowance of wrong claim U/s 54F
of IT Act Rs. 1764952/-
Total Rs. 2118551/-
The assessment year involved is 2006-07 and original return U/s 139(1) of IT Act was filed on 31/10/2006, after search on 23/08/2007 return was filed U/s 153A on 28/02/2008. Admittedly the salary income amounting to Rs. 353599/- from employer at Bangkok for the period 01/01/2006 to 31/04/2006 was not shown in the original return. Similarly 8 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT regarding wrong claim of deduction U/s 54F of IT Act, amounting to Rs. 1764952/-, there is no dispute that such claim was not allowable as per provisions of IT Act and even then the appellant claimed the same. Such wrong claim was made both in original return and return filed in compliance to notice U/s 153A of the IT Act. It may be noted that the assessee admitted such wrong claim during the assessment proceedings only when vide ordersheet entry dated 18/03/2009, the A.O. specifically required the assessee to justify such claim. In this background it is to be seen whether such issues constituted concealment of income/furnishing of inaccurate particulars of income or not. The A.O.'s contention is that such mistake were not bonafide and that it tantamount to concealment of income/furnishing of inaccurate particulars of income. The appellant also admitted to have omitted such income by way of salary being not shown in the return and wrong claim U/s 54F of IT Act but it is stated that salary was paid/received in Bangkok and tax was deducted thereon. The appellant further stated that he was under bonafide belief that such salary income was not to be included while filing return of income in India. Similarly regarding wrong and excess claim U/s 54F of IT Act it is stated that due to ignorance of law such claim was made and no malafide could be attributed. On careful consideration of the facts and circumstances of this case, it is noted that the 9 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT 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 of IT Act 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:
(i) CIT Vs. Rakesh Suri 331 ITR 458 (All)
10 ITA 842/JP/2012_
Nirmal Kumar Bardia Vs. DCIT
(ii) 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. Reliance is placed on the following case law for above mentioned proposition of law:
(i) Union of India Vs. Dharmendra Textile Processors 306 ITR 277 (SC).
(ii) CIT Vs. Atul Mohan Jindal 317 ITR 1 (SC).
Keeping in view the detailed discussions made above, it is held that the appellant's case was covered U/s 271(1)(c) of IT Act and the A.O. has accordingly rightly imposed penalty of Rs. 7,11,833/-. The action of the A.O. is accordingly confirmed."
4. Now the assessee is in appeal before us. The ld AR of the assessee reiterated the arguments made before the ld CIT(A). He has further submitted that the assessee never agreed to make addition/disallowance and no penalty could be imposed nor he argued that as default was not willful so penalty is not imposable. The case law cited by the ld CIT(A) are not on facts of the case and so the same are 11 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT not applicable. The assessee has neither furnished inaccurate particulars of income nor concealed any particulars of income. 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 of I. T. Act, 1961 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. The Ld. A.O. also not held either in assessment proceedings nor 12 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT in penalty proceedings that conduct of assessee in not doing so was contumacious or fraudulent.
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 5 - Kalyan Colony, Jaipur for Rs. 24,72,700/- which was 13 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT 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. In respect to above two additions, assessee has furnished explanation and that explanation was not found to be factually incorrect or false. It is settled law that the penalty on the ground of concealment of particulars or non-disclosure of full particulars can be levied only when in the accounts/return on item has been suppressed dishonestly or the item has been claimed fraudulently or a bogus claim has been made. When the facts are clearly disclosed in the return of income, penalty cannot be levied and merely because an amount is not allowed or taxed to 14 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT income, it cannot be said that the assessee had filed inaccurate particulars or concealed any income chargeable to tax. Further, conscious concealment is necessary. 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."
The assessee before CIT (A) relied on the Hon'ble Apex Court judgment in case of CIT Vs. Reliance Petro Products P. Ltd. (2010) 322 ITR 158 wherein it was held.
"That mere making of claim which is not substantiable in law by itself will not amount to furnishing of inaccurate particulars of income.
In this context it is contended that the claim of the appellant was neither bogus or fraudulent and even if such claim has been made which has not been allowed then keeping in view the ratio of judgment decide by the Hon'ble Supreme Court mentioned above, the case of the appellant cannot said to be furnishing of inaccurate particulars of income or concealment of income. The appellant has further placed
15 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT reliance on the judgment of Hon'ble ITAT, Mumbai Bench in case of Narang International Hotels Pvt. Ltd. Vs. DCIT ™ reported in (2012) 137 ITD 53.
The Ld. CIT (A) gave finding (para - 6 of appeal order last line) that "Though it is correct that basic facts relating to these two issues are shown by appellant".
In view of the above specific finding the said judgments are to be applied which has not been dealt by CIT (A) in his appeal order. As regards to finding that the submission of appellants cannot be accepted and treated as genuine in as much as the appellant is regularly assessed to tax deriving income from business or profession, the accounts are audited by Chartered Accountant and the appellant is assisted by taxation expert on regular basis, it is submitted that reliance is placed on the judgment of Hon'ble Supreme Court in the case of Price Water House Cooper Pvt. Ltd. Vs. CIT (2012) 348 ITR 306 wherein it is observed that even a reputed firm having great expertise available with it, it was possible that a mistake could occur. The Supreme Court further held that while submitting return the assessee should have been careful but due to the absence of due care a bonafide and inadvertent 16 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT mistake did not mean that assessee was guilty of furnishing inaccurate particulars or attempting to conceal the income. The Delhi High Court in Shervani Hospitalities Ltd. Vs. CIT (2013) 89 DTR (Del) 169 after discussing various judgments on the issue held that 'merely making a claim which is held not sustainable under law should not lead to penalty u/s 271 (1) (c), when assessee had furnished full particulars.' In view of above facts and position of law the Ld. CIT (A) is wrong and has erred in law in confirming penalty of Rs. 7,11,833/- levied by A.O. u/s 271 (1)
(c) of I. T. Act, 1961 which deserves to be deleted.
5. At the outset, the ld DR has vehemently supported the order of the ld CIT(A).
6. We have heard the rival contentions of both the parties and perused the material available on the record. It is a fact that the assessee had not disclosed the salary received from RMC Gems Thai Co. Ltd., Bangkok at Rs. 3,53,599/- but disclosed after search proceeding carried out in case of assessee and return filed U/s 153A of the Act. The assessee had shown long term capital gain on sale of agricultural land, Kalyan colony plot and plot of Chitrakoot in the computation of income and taxable long term capital gain was also claimed by the assessee 17 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT exempted by making investment in residential house. However, the assessee purchased another residential house other than the new assets within a period of one year after the date of transfer of original assets. The assessee purchased another residential house plot NO. 5-K, Kalyan Colony, Jaipur for Rs. 24,72,700/- on 11/5/2006, therefore, the assessee has claimed excess exemption U/s 54F(i) of the Act. 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, 18 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT 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 law cited by the assessee are not squarely applicable on it. 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 after considering the decision of Hon'ble Supreme Court in the case of Union of India Vs. Dharmendra Textile Processors (supra) and CIT Vs. Atul Mohan Jindal (supra) held that Explanation 1 to section 271(1)(c) of the Income-tax Act, 1961 , 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 19 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT reliable evidence. When the initial onus placed by the Explanation has been discharged by him, the onus shifts to the Department to show that the amount in question constituted income and not otherwise. 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 ld CIT(A) was right to confirm the penalty on given circumstances. Accordingly, we uphold the order of the ld CIT(A)
7. In the result, the assessee's appeal is dismissed. Order pronounced in the open court on 07/09/2015.
Sd/- Sd/-
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(R.P.Tolani) (T.R. Meena)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 07th September, 2015
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Nirmal Kumar Bardia, Jaipur.
2. izR;FkhZ@ The Respondent- The DCIT, Central Circle-2, Jaipur.
20 ITA 842/JP/2012_ Nirmal Kumar Bardia Vs. DCIT
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 842/JP/2012) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar