Income Tax Appellate Tribunal - Agra
Mukesh Kumar Agarwal, Huf., Agra vs Department Of Income Tax on 8 May, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
AGRA BENCH, AGRA
BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No. 178/Agra/2011
Asstt. Year : 2002-03
D.C.I.T. 4 (1), vs. Mukesh Kumar Agarwal, HUF,
Agra. C-46, Kamla Nagar, Agra.
(PAN : AADHM 6745 H)
(Appellant) (Respondent)
Appellant by : Shri Sohail Akhtar, Jr. D.R.
Respondent by : Shri Anurag Sinha, Advocate
Date of hearing : 08.05.2012
Date of pronouncement of order : 11.05.2012
ORDER
Per Bhavnesh Saini, J.M.:
This appeal by the Revenue is directed against the order of ld. CIT(A)-II, Dehradun (camp Agra) dated 21.01.2011 for the assessment year 2002-03, challenging the cancellation of penalty u/s. 271(1)(c) of the IT Act.
2. The ld. CIT(A) noted the brief facts in the impugned order that in the course of assessment proceedings, the assessee submitted before the AO that he was not in a mood to fight with the department on technical issues and wanted to cooperate and surrender the capital gains income to be taxed as income from other sources. However, the AO examined the transactions in question and concluded that the 2 ITA No. 178/Agra/2011 capital gain transactions claimed were sham and brought the sale proceeds to tax as income from other sources and addition was made u/s. 68 of the IT Act. The AO initiated the penalty proceedings and vide separate order, penalty was levied which was challenged before the ld. CIT(A). The submissions of the assessee were forwarded to the AO for comments, but the same were not taken care of. It was submitted before the ld. CIT(A) on behalf of the assessee that the capital gains income, originally shown, was surrendered in the course of assessment proceedings as income from other sources and the same was assessed as such and, therefore, there was no question of preferring any appeal against the quantum. It was contended that in many cases, where the income from long term capital gains was surrendered to be assessed as income from other sources, the ITAT Agra Bench deleted the penalty and relied upon such orders in the cases of Ashok Kumar Lavania vs. ACIT, Saumya Agarwal vs. ITO. It was also submitted that in the cases of Dr. S.D. Maurya and Dr. R.C. Mishra, on identical facts, penalty levied on surrender of long term capital gains to be assessed as income from other sources, the ld. CIT(A) deleted the penalty and on further appeal, the Tribunal confirmed the order of the ld. CIT(A). The ld. CIT(A) on consideration of the submissions of the assessee found that there is no single feature which could be distinguished from the facts of the case. Therefore, following the Tribunal order, penalty was cancelled and the appeal of the assessee was allowed. 3 ITA No. 178/Agra/2011
3. The ld. DR relied upon the orders of the AO and submitted that reassessment proceedings were initiated u/s. 148 of the IT Act and despite service of notice, the assessee did not furnish return of income in response to the notice u/s. 148 of the IT Act. The assessee requested for the extension of time to file the return before the AO, which was rightly rejected because there is no such provision under the law. He has filed copy of letter of the assessee dated 18.08.2005, in which the assessee made surrender of capital gains income as income from other sources. He has also filed copy of letter of M/s. Capital Trade Link Ltd. dated 22.07.2005 in which it was explained that the concerned shares are still held in the name of the assessee and have not been transferred to any person in the records of the company. The ld. DR referred to the order-sheet entries recorded by the AO, in which the AO has noted on 26.07.2005 that no information has been received from the broker M/s. North India Securities Pvt. Ltd., but the information has been received from the Capital Trade Link Ltd. Thereafter on the request of the assessee, the case was adjourned. The ld. DR referred to the order sheet dated 11.08.2005 in which the authorized representative of the assessee appeared before the AO and filed the reply and objections regarding the notice u/s. 148 of the IT Act in which the AO rejected the claim of assessee for allowing time to file the return belatedly in response to notice u/s. 148 of the Act and the assessee was directed to file complete reply on 18.08.2005. The AO also recorded in this order sheet dated 11.08.2005 that the assessee was shown all information received from 4 ITA No. 178/Agra/2011 M/s. Capital Trade Link Ltd., in which it was recorded that the shares are still held in the name of assessee. Therefore, the assessee was directed to prove the genuineness of sale of shares and to show cause why it should not be concluded that the shares were not sold and the amounts received on account of sale of shares be not added as undisclosed income u/s. 68 of the IT Act. The case was adjourned to 18.08.2005 and the assessee filed reply on 18.08.2005 making surrender of capital gains as income from undisclosed sources and the assessee also stated in reply that there is no necessity to prove the genuineness of the transaction in the matter. The ld. DR, therefore, submitted that the assessee surrendered the income on account of undisclosed sources only when the AO made total enquiry against the assessee and cornered the assessee in this behalf, otherwise the assessee would not have disclosed the undisclosed income. The ld. DR further submitted that the AO brought sufficient material on record to prove that the assessee entered into bogus transactions of purchase and sale of shares because the assessee was not able to prove the genuineness of the transactions in the matter. The ld. DR further submitted that when the AO asked for the complete details and brought the material on record against the assessee, the assessee made a surrender of undisclosed income because only 10% tax was paid on capital gains instead of full tax payable on undisclosed income. The ld. DR submitted that the assessee had intentionally and deliberately filed inaccurate particulars of income in the original return. Therefore, the ld. CIT(A) should not have cancelled the penalty. He has 5 ITA No. 178/Agra/2011 submitted that the assessee made surrender of undisclosed income after initial enquiry conducted by the department and sufficient material was brought against the assessee. Therefore, the decisions of the Tribunal relied upon by the ld. CIT(A) are not applicable. He relied upon the decision of Hon'ble Allahabad High Court in the case of CIT vs. Rakesh Suri, 331 ITR 458 (All.), in which it was held that when surrender of income was made under compulsion by the Revenue, there is no voluntary disclosure of income and penalty u/s. 271(1)(c) was justified. The ld. DR further submitted that the decisions of the Tribunal relied upon before the ld. CIT(A) are clearly distinguishable on facts because in the case of the assessee, no revised return has been filed.
4. On the other hand, the ld. counsel for the assessee reiterated the submissions made before the authorities below and submitted that no enquiries were conducted by the AO prior to 11.08.2005 and the assessee made surrender of income on 18.08.2005 immediately as noted in the assessment order because the assessee wanted to buy peace. He has submitted that the assessee was never cornered by the department of holding undisclosed income. The assessee in the original return of income disclosed the entire amount of the addition as income earned on account of long term capital gains. Therefore, the assessee disclosed complete facts in the original return of income. Therefore, it is not a case of concealment of income or filing of inaccurate particulars of income. He has submitted that the burden is upon 6 ITA No. 178/Agra/2011 the AO to prove that the assessee has concealed the particulars of income. He has relied upon the order of ITAT, Agra Bench in the case of ITO vs. Smt. Vandana Agarwal dated 17.07.2009 (PB-50), in which the Tribunal found that the explanation of the assessee has been substantiated by the evidence brought on record. Therefore, penalty is not leviable. He has also relied upon the decision of Hon'ble Punjab & Haryana High Court in the case of Rajeev Garg and others, 313 ITR 256, in which it was held that the assessee having surrendered the additional income along with explanation in the revised return filed in pursuance of notice u/s. 148 of the IT Act and the AO has not taken any objection that the assessee's explanation was not bona fide, penalty u/s. 271(1)(c) is not leviable. He has submitted that the Hon'ble High Court relied upon the decision in the case of Suresh Chand Mittal and that the decision in the case of Rajeev Garg has been upheld by the Hon'ble Supreme Court (PB-49) by dismissing the departmental appeal.
5. We have considered the rival submissions and the material on record. It is not in dispute that the assessee filed original return of income on 07.08.2002 declaring income of Rs.7,98,950/- on account of long term capital gains on selling the shares of M/s. Capital Trade Link Ltd. The said shares were stated to be sold through the broker M/s. North India Securities Pvt. Ltd., New Delhi. On getting information of bogus transaction of shares, the AO issued notice u/s. 148 of the 7 ITA No. 178/Agra/2011 Act, asking the assessee to furnish the return of income u/s. 148 of the IT Act. The assessee's representative instead of complying with the statutory notice, sought adjournments on various dates and ultimately proceedings were adjourned to 04.08.2005 and 11.08.2005. The assessee's representative wanted time to file return of income u/s. 148 belatedly, but his request was not allowed because there was no such provision under the law. The order sheets of the AO have been filed in the paper book by the ld. DR. The AO on 26.07.2005 noted that no information has been received from broker, M/s. North India Securities Pvt. Ltd., but information was received from M/s. Capital Trade Link Ltd. dated 22.07.2005 whose shares were alleged to be sold through broker. Copy of the letter dated 22.07.2005 is filed on record in which M/s. Capital Trade Link Ltd. confirmed that entire shares stated to be sold are still held in the name of assessee and have not been transferred to any person in the records of the company. Thereafter the assessee's representative appeared on 05.08.2005 before the AO and sought adjournment for filing reply. The case was adjourned on 11.08.2005 and on that day, reply was filed and objections were raised regarding proceedings u/s. 148 and assessee was directed to file reply by 18.08.2005 and the assessee was shown information received from M/s. Capital Trade Link Ltd. that no shares have been transferred till date and the same are held in the name of assessee. Therefore, the assessee was directed to prove the genuineness of the sale of shares in question and show cause notice was also given to the assessee as to why it should not be concluded that the shares were 8 ITA No. 178/Agra/2011 not sold and the amount in question has been received on account of undisclosed income should not be added u/s. 68 of the IT Act. The case was adjourned to 18.08.2005. The ld. DR filed copy of reply of assessee dated 18.08.2005 in which the assessee surrendered the income earned on sale of shares of M/s. Capital Trade Link Ltd. as income from undisclosed sources and it was clarified that because of the above surrender made by the assessee, there is no need to prove the genuineness of the transaction in the matter. Before proceeding further, we may also note here that despite surrender made by the assessee of the income out of undisclosed sources, the AO brought sufficient material on record to prove that the assessee has not entered into any genuine transaction of sale of shares. Therefore, the finding given in the assessment order and the surrender made by the assessee in pursuance of the enquiries conducted by the AO against the assessee, it is established on record that the assessee never filed any revised return in pursuance of notice u/s. 148 of the Act. It is also established on record that the AO conducted enquiries into the matter of sale of bogus shares prior to surrender made by the assessee on 18.08.2005 and established on record that the AO brought sufficient material on record against the assessee that the assessee entered into bogus and sham transactions of sale of shares and specific material was brought to the notice of assessee and show cause notice was given to the assessee on 11.08.2005 as to why addition u/s. 68 be not made against the assessee. It is, therefore, clear on record that the assessee at the initial stage tried to prolong the matter before the AO 9 ITA No. 178/Agra/2011 at the reassessment stage and has not provided any relevant information to the AO. The assessee made disclosure of undisclosed income only under compulsion when the assessee was cornered by the AO on the basis of the material found against him. The law has provided furnishing of revised return in a case of any omission in the original return. Such omission has to be inadvertent and bona fide. If the omission is intentional, the revised return also cannot absolve the assessee. Each case would depend on the facts of each case, considering the investigation conducted by the Revenue Department and the evidence collected during the course of investigation by the department. In this case, the original return filed by the assessee declaring capital gains in question on sale of shares of M/s. Capital Trade Link Ltd. was not bona fide because the shares in question held by the assessee were never transferred in the name of any person as a purchaser. This fact was within the knowledge of the assessee which was also confirmed by the Company, M/s. Capital Trade Link Ltd., whose shares were allegedly held by the assessee and allegedly sold by the assessee. Since no shares were sold, there is no question of receiving any long term capital gains on the same transaction. The AO conducted enquiries in the case of brokers, M/s. North India Securities Pvt. Ltd., New Delhi and despite specific enquiries made in the case of broker, the broker was not traceable. The bank accounts were examined from where drafts in question were issued and it was found that the cash was deposited before issue of drafts. Thus, sufficient material was brought on record by the Revenue department against 10 ITA No. 178/Agra/2011 the assessee and all material was brought to the notice of assessee and only thereafter, the assessee made surrender of undisclosed income on 18.08.2005. 5.1 Hon'ble Allahabad High Court in the case of CIT vs. Rakesh Suri 331 ITR 458 held -
"The assessee filed his return for the assessment year 2004-05 disclosing total of Rs. 1,17,600. The case was selected for scrutiny. It was found that the assessee had shown long-term capital gains on sale of shares. He had constructed a house between financial years 2001-02 and 2004-05 investing Rs.56,74,567. The income-tax authorities repeatedly required the assessee to furnish the contract note of purchase and sale of shares sold with a copy of bill of broker, justify holding of shares, which were sold, year-wise investment in the house property, valuation report of the approved valuer, confirmation of salary received from the company and other documents. The assessee did not furnish full details. His statement that the shares had been sold through the Delhi Stock Exchange was found to be false. The assessee was directed to furnish reply in terms of the order dated November 9, 2006. He was further directed to furnish the name of the stock exchange through which shares were purchased and sold, rate of shares in the stock exchange on date of purchase and sale on or before December 6, 2006. On December 6, 2006, the assessee surrendered the entry appearing in his bank account on sale of shares amounting to Rs. 61,35,844 on agreed basis. The Assessing Officer treated the sum of Rs. 61,35,844 as income from undisclosed sources under section 69A of the Income-tax Act, 1961, and also levied penalty. The Commissioner (Appeals) cancelled the penalty and this was confirmed by the Tribunal. On appeal to the High Court:
Held, allowing the appeal, that the assessee had concealed the material facts and given incorrect statement of facts in the application and also not provided information required by the Assessing Officer, after receipt of notice. Accordingly the action of the assessee was neither bona fide nor voluntary. The manner in which the assessee had tried to prolong the case before the Assessing Officer by not providing information immediately and by narrating incorrect facts in 11 ITA No. 178/Agra/2011 the letter dated December 6, 2006 showed that the assessee had concealed the income and disclosure was not voluntary but under compulsion being cornered by the Assessing Officer. Penalty had to be imposed."
5.2 Hon'ble Gujrat High Court in the case of LMP Precision Engg.. Co. Ltd. vs. DCIT, 330 ITR 93 held -
"The Deputy Director of Income-tax (Investigation), Bombay undertook survey action some time in September, 1988 and on verification of certain purchases made by the assessee it was found that the purchases did not appear to be genuine. Before the proceedings could be finally concluded the assessee filed a declaration under section 273A of the Act disclosing additional income of Rs. 54,71,463 as being relatable to assessment year 1985-
86. On the same day, declaration was also made of a sum of Rs.18 lakhs each for assessment years 1986-87, 1987-88 and 1988-89. This application under section 273A of the Act was followed by revised returns filed on February 14, 1989 for all the three assessment years declaring identical additional income in the revised returns. Before assessments could be finalised, after regularising the same by issuance of notice under section 148 of the Act, the assessee came forward with another application declaring additional income of Rs. 78,56,613. The first declaration was in relation to purchases from ISC while the second disclosure was in relation to purchase made from SC, NB and NPST. The assessments were not challenged by the assessee. The Assessing Officer initiated penalty proceedings under section 271(l)(c). The explanation of the assessee for all the three years was that revised returns were voluntary, additional income in each of the revised returns was declared to purchase peace and no concealment was involved. It was submitted that the returns were revised even before issuance of notice under section 148 of the Act. The Assessing Officer did not accept the explanation of the assessee and levied penalties. Successive appeals filed by the assessee before the Commissioner (Appeals) and the Tribunal were dismissed by the two appellate authorities confirming the penalties levied by the Assessing Officer. However, the Tribunal came to the conclusion that the assessee had co-operated in finalisation of the assessment and accepted the assessment of additional income and so, the Tribunal 12 ITA No. 178/Agra/2011 reduced the penalty levied from the maximum to the minimum. On a reference:
Held, that it was only after the statement of the chairman and managing director was recorded by the Deputy Director of Income- tax (Investigation Mumbai, that the first disclosure dated October 20,1988, Rs. 54,71,463 was made accompanied by another disclosure of Rs. 54 lakhs in a round figure being divided into three segments of Rs. 18 lakhs each for assessment yean 1986-87, 1987-88 and 1988-89. The revised return declaring a sum of Rs.78,56,613 came about as a consequence of follow-up proceedings undertaken by the Deputy Director of Income-tax in relation to the other three suppliers, viz., SC, NB and NPST. Therefore, the assessee could not be stated to have voluntarily come forward to disclose income which had unintentionally been omitted from the original return of income. The imposition of penalty was valid."
5.3 Hon'ble Punjab & Haryana High Court in the case of Prem Pal Gandhi vs. CIT, 335 ITR 23 held -
"The assessee derived income from property dealings. After assessment was completed, the Assessing Officer noticed that the assessee had substantial transactions in the bank which were not disclosed and proceedings were Initiated for reassessment. The assessee filed a revised return and offered the peak credits in the bank account and interest thereon, with a condition that no penalty be imposed and he may not be prosecuted. The Assessing Officer did not accept the conditions. The Assessing Officer completed the assessment and also imposed penalty. The Commissioner (Appeals) accepted the plea of the assessee to the effect that the assessee having filed higher return and surrendered the undisclosed income, penalty was not leviable. The Tribunal reversed the order on the ground that the assessee furnished inaccurate particulars of his income and also concealed particulars of his income while filing the original return and was not able to establish the inadvertent mistake or omission in the original return, when he declared showing much larger income in the revised return. On appeal:13 ITA No. 178/Agra/2011
Held, dismissing the appeal, that the plausibility or otherwise of the explanation of the assessee was a pure question of fact. Admittedly, the assessee concealed the transactions in the bank account and when notice of reassessment was issued, finding no other way out, the assessee surrendered income to avoid penal consequences. In such a situation, it could not be held that the assessee wanted to buy peace of mind and there was no evidence of concealment, which called for penalty. This was not a case where penalty had been imposed only because the assessee disclosed higher income voluntarily but a case of clear concealment where the assessee having found no other way out, was forced to surrender the undisclosed income. No substantial question of law arose."
5.4 Hon'ble Bombay High Court in the case of Jyoti Laxman Konkar vs. CIT, 292 ITR 163 held -
"The assessee had filed a return for the assessment year 1999- 2000 declaring an income of Rs.7,40,510. Not satisfied therewith, the Assessing Officer carried out a survey under section 133A of the Income-tax Act, 1961, and during the survey found that there was a discrepancy in stock to the tune of Rs.18,28,706 which was brought to the notice of the assessee, and the assessee filed a revised return disclosing additional income of Rs.18,28,706. The Assessing Officer imposed penalty under section 271(1)(c) and this was upheld by the Tribunal. On appeal to the High Court :
Held, dismissing the appeal, that the question whether there is concealment of income or not has to be decided with reference to the facts of a given case and the fact finding authorities under the Act having come to the conclusion that in the facts of the case, the assessee had concealed the income initially with a view to avoid the payment of tax, the imposition of penalty was valid."
5.5 All the above decisions squarely apply to the case of the assessee and prove that the assessee had intentionally and deliberately filed inaccurate particulars of 14 ITA No. 178/Agra/2011 his income in the original return and therefore, penalty was leviable in the present case.
5.6 The ld. counsel for the assessee, however, relied upon the decision of Hon'ble Punjab & Haryana High Court in the case of Rajeev Garg and others (supra) in support of his contention that it is not a case of concealment in, which decision in the case of Suresh Chand Mittal has also been considered. However, the said decisions in the case of Rajeev Garg and Suresh Chand Mittal have been considered by the Hon'ble Punjab & Haryana High Court in its later decision in the case of Prem Pal Gandhi vs. CIT (supra) and penalty has been confirmed. Therefore, said decisions would not support the case of the assessee. Further in the case of assessee, no revised return has been filed in response to the notice u/s. 148 of the IT Act and further the assessee made surrender of undisclosed income only when he was confronted with the incriminating material against him and cornered by the Revenue Department after making detailed enquiry. Therefore, said decision would not support the case of assessee. The ld. counsel for the assessee further relied upon the order of ITAT, Agra Bench in the case of Smt. Vandana Agarwal (supra), in which the Tribunal found that explanation furnished by the assessee stands substantiated by evidence brought on record. In the light of the decisions of various High courts, noted above, first of all decision of Tribunal cannot be given preference and further when the assessee himself surrendered the undisclosed 15 ITA No. 178/Agra/2011 income at the assessment stage, there is no question of assessee's explanation substantiated by the evidence to prove genuine transaction of sale of shares. Therefore, such decision of the Tribunal would not support the case of the assessee.
6. We may also note here that the ld. CIT(A) without considering the facts and material on record, merely by following another order of Tribunal cancelled the penalty. Such a casual approach by the ld. CIT(A) is not appreciated. The ld. CIT(A) failed to consider the order sheet and the material collected by the AO during the course of investigation which clearly proved that the assessee has deliberately and intentionally filed inaccurate particulars of income in the original return of income and only when the assessee was confronted and cornered by the department, the assessee made surrender of undisclosed income. On collecting adverse material against the assessee, had the department not reopened the assessment u/s. 148 of the IT Act, the assessee would never surrender the undisclosed income. Even if the assessee would have filed the revised return in the facts of this case in pursuance to the notice u/s. 148 of the IT Act, it would not make any difference because the AO has collected incriminating material against the assessee prior to the surrender of undisclosed income and confronted the same to the assessee with due show cause notice. Therefore, the facts and material brought on record clearly justify the levy of penalty, which has been ignored by the 16 ITA No. 178/Agra/2011 ld. CIT(A) while canceling the penalty. Therefore, the order of the ld. CIT(A) cannot be sustained in law.
7. Considering the totality of facts and circumstances in the light of decisions of various courts referred to above, we are of the view that the ld. CIT(A) was not justified in canceling the penalty. We accordingly, set aside and reverse the order of ld. CIT(A) and restore the order of AO in imposing penalty u/s. 271(1)(c) against the assessee.
8. In the result, the departmental appeal is allowed.
Order pronounced in the open court.
Sd/- Sd/-
(A.L. GEHLOT) (BHAVNESH SAINI)
Accountant Member Judicial Member
*aks/-
Copy of the order forwarded to :
1. Appellant
2. Respondent
3. CIT(A), concerned By order
4. CIT, concerned
5. DR, ITAT, Agra
6. Guard file Sr. Private Secretary
True copy