Income Tax Appellate Tribunal - Hyderabad
Shri A.V.R. Prasad vs Income Tax Officer on 11 August, 2005
Equivalent citations: (2006)99TTJ(HYD)920
ORDER
D. Manmohan, Judicial Member
1. These appeals, filed at the instance of the assessee, are directed against the common order dated Ist March, 2001, passed by the CIT(Appeals) -IV, Hyderabad, and they pertained to the assessment years 1.994-95 to 1997-98.
2. Penalties levied by the Assessing Officer under Section 271(1)(c) of the Act, and confirmed by the CIT(A), are the subject matter of dispute before the Tribunal.
3. Assessee is a proprietor of M/s. Mahalakshmi Seeds, Nondyal. which carried on business of procuring, processing and supplying certified seeds to different companies. Though the turnover of the assessee exceeded Rs.40-lakhs for each of the four years under consideration, the assessee did not file any returns of income. On 3.6.1997, Assessing Officer conducted survey operations under Section 133A of the Act on the business premises of the assessee. It way noticed that the assessee started his business in the year 1993, and though it was raising bills on the companies for the value of the seeds as well as service charges, which exceeded Rs.40-lakhs for each of the four years, the assessee did not file any return of income for the said assessment years. It may be noticed that the assessee admitted, during the course of survey operations, that he had not maintained any books of account, except a rough book, and also claimed that he was acting only as an agent of various companies, and thus, entitled to service charges only. It was also submitted that the service charges were his gross receipts, against which deductions towards overheads, rent, electricity, packing, transnsportation, etc, need to be allowed, and net income alone is assessable to tax. The following incomes were offered for taxation subject to finalisation of his accounts, and preparation of statements Asstt. Year Income Offer
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1994-95 Rs. 50,000 1995-96 Rs. 1,00,000 1996-97 Rs. 1,50,000 1997-98 Rs. 2,00,000 --------- ---------------
Assessee had also undertaken to furnish the returns of income for the above mentioned years.
4. Consequent to the survey operations, the Assessing Officer had issued notice under Section 148 of the Act in respect of assessment years 1994-95 and 1995-96. For the assessment year 1996-97, a notice was issued under Section 142(1) of the Act. In response to the said notices, assesses had furnished returns of income as under:-
Assessment Year Date of filing the return Incomes disclosed ---------------- ------------------------- ------------------- 1994-95 30.3.1998 Rs. 35,000 1995-96 30,3.1998 Rs. 50,140 1996-97 30.3.1998 Rs. 94,690 ---------------- ------------------------- -------------------
For the assessment year 1997-98, the assessee had filed return of income on 30.3.1998, deciding total income of Rs. 67,230.
5. During the course of assessment proceedings, the assessee filed revised returns of income, wherein the income as declared during the course of survey proceedings was accepted. Accordingly, assessments were completed on the incomes thus returned.
6. It may be noticed thast while accepting the revised returns, the Assessing Officer observed that the gross receipts admitted by the assesses have been verified with reference to the account copies obtained, and found to be coned. In other words, there is nothing on record to suggest that the assessing officer, during the course of examination noticed certain discrepancies to come to the conclusion that there was escapement of income.
7. Consequent to the assessments made on the basis of the revised returns, Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Act in response to which the assessee submitted, vide letter dated 11.4.2000, that the assesses had maintained books of account, according to his convenience, and the Assessing Officer has accepted the same and most of the entries have been proved to be correct it? the scrutiny assessment, and thus, the assessee has not concealed any particulars of income or furnished inaccurate particulars of income. Further the revised returns were field in order to purchase peace and to cooperate with the Department, with an under standing that penalty would not be levied on the income declared in the revised returns. Reliance was also placed upon several decisions, including the decision of the Apex Court in the case of Sir Shadilal Sugar & General Mills Ltd. 168 ITR 705.
8. The Assessing Officer rejected the contentions of the assessee. He observed that the assessee had started the business in 1.993, but did not file the returns of income till the date of survey operations. He further observed that during the course of survey, the fact that the assesses has done considerable business, was detected and it was also noticed that the assessee's gross receipts/sales are to the extent: of Rs. 1,66,720 for the assessment year 1994-95, and he has not complied with the filing of the returns of income, even though the asseesee was aware that he has taxable income. He, therefore, concluded that the action of the assessee in filing the returns declaring lesser income, and thereafter filing the revised returns declaring higher income, only after the detection of concealed income based on material found during the survey, amounted to furnishing inaccurate particulars of income. He also noticed that though the assessee contended that proper books were maintained, the fact remains that books were not maintained, in proper fashion and even in the sworn statement it was remarked that he has not maintained proper books of account. In the absence of the books, it is not possible to arrive at correct income, and thus, the assesses can be said to have furnished inaccurate particulars of income in the original return, which was revised by declaring higher income. He therefore levied minimum penalty under Section 271(1)(c) of the Act in respect of the four years under consideration,
9. Aggrieved, assessee contended before the CIT(A) that he maintained rough books, which showed payments made to Ryots for the quantities of seeds produced and supplied by thorn. The account copies of the companies from whom the assessee has procured seeds have been obtained and verified by the Assessing Officer and he also found that majority of the expenses are supported by vouchers, as could be noticed by the Assessing Office from the assessment order. Thus, it cannot be said that the Assessing Officer haw detected concealment at the time of survey operations. Though the assesses initially filed the returns declaring lesser income, the revised returns were filed to purchase peace with the Department, particularly in view of the fact that the assesses agreed to declare such income during the course of survey operation. There is nothing on record to suggest that the assessee has concealed income or furnished inaccurate particulars of income. Mere delay in filing the returns of income should not be considered as malicious for imposing penalty under Section 271(1)(c) of the Act. It was also stated that the assesses has cooperated with the Department in finalising the assessments, and paid the taxes, and the circumstances show that it was not a fit case for the levy of penalty. The learned counsel appearing on behalf of the assessee relied upon several case-law in this regard,
10. The learned CIT(A) rejected the contentions of the assessee. He observed that during the course of survey, substantial turnover for all the years under consideration was noticed but, in spite of that, the assessee did nut-file returns of income. It is only when the assesses was confronted with the material found at the time of survey, he has disclosed incomes of Rs. 50,000; Rs, 1,00,000; Rs. 1,50,000; and Rs.2-lakhs for the assessment years 1994-95. to 1997-98 respectively. He therefore, concluded that the incomes earned by the assessee would have remained outside the tax net, but for the survey operations, and thus, it was a clear case of concealment of income, The case-law relied upon by the assessee was distinguished on facts. He observed that in the case of CVC Mining Company (102 ITR 830), relied by the learned counsel for the assessee, certain additions were made for the inability of the assessee to adduce evidence. Since the probabilities of the case spoke both for and against the assessee, penalty levied in that case was cancelled, whereas in the instant case, the revised returns were filed only after detection by the Department, Further, the case relied upon by the assessee pertained to the assessment year 1957-58, whereas the word 'delibertately' appearing in Section 271(1)(c) was deleted subsequently. With regard to the decision of the ITAT Pune Bench, in the case of Silver Palace(68 ITD 550), also relied upon by the assessee before him, the learned CIT(A) observed that in that case, there was an assurance from the side of the Survey Officer that no penalty would be levied, whereas in the instant case, there was nothing on record to show that any assurance was given from the side of the Assessing Officer, and at any rate, there cannot be any assurance, against the provisions of law, when the facts clearly establish that the assessee has concealed taxable income. He thus, confirmed the orders passed by the Assessing Officer.
11. Further aggrieved, assessee is in appeal before the Tribunal.
12. The learned counsel appearing on behalf of the assessee strongly relied upon the decision of the Supreme Court in the case of CIT v. Suresh Chandra Mitel 251 ITR 9 to submit that initial burden of proving that the short fall in the declared income was on account of bona fide reasons, was discharged by explaining that the revised returns were filed to purchase peace of mind and to avoid vexatious litigation. Thus, the onus shifted to the Revenue authorities. In the instant case, there is nothing on record to show that, during survey operations, the authorities have detected concealed income. Even during the course of assessment proceedings, no material as such was found to show that the income finally assessed is the correct income and but for the detection during the survey the same would hot have been brought to tax. He thus, strongly relied upon the decision of the Supreme Court in the case of CIT v. Suresh Chandra Mittal (supra), Detailed written submissions reiterating the above contentions, were also filed before me.
13. On the other hand, the teamed Departmental Representative strongly supported the orders of the tax authorities, and also relied upon the unreported decision of Hyderabad 'A' Bench of the Tribunal dated 9.9,2004, in the case of Mastana Constructions (ITA No. 422/Hyd/2000), in support of her contention that the returns captioned as 'revised' returns cannot be considered as revised returns, much less voluntary returns, and in a case where higher income is declared after investigation by the Department, penalty is leviable.
14. I have carefully considered the rival submissions and perused the record. In my considered opinion, tax authorities have not looked at the issue from the correct perspective. Admittedly, neither the assessment order not the penalty order contained details to prove that the differential income declared by the assesses in the revised returns, was defected by the Department before the assessee has come forward to furnish the revised returns. There was no doubt some delay on the part of the assessee to file the returns of income, particularly in respect of assessment years 1994-95 to 1996-97. However, the case of the Assessing Officer rested upon the fact that in the returns field by the assesses, the income as originally admitted during the course of survey proceedings, was not declared, and thus it amounted to furnishing inaccurate particulars, and thereby the assesses concealed income. Thus, the issue is confined to the difference between the originally returned income and the income declared in the revised returns, though penalty was levied with reference to the tax payable on the assessed income, as could be seen from the assessment order.
15. The. assessee maintained some rough books supported by some vouchers, etc. Account copies from the companies from which the assessee has procured foundation seeds have been obtained and verified by the assessing officer. Gross receipts admitted by the assessee, supported by the vouchers, were also verified by the Assessing Officer. There is not even a whisper doubting the correctness of the particulars contained therein,
16. In response to the penalty notice, the assessee submitted, vide explanation dated 11.4.2000, that the revised returns were filed in order to purchase peace and cooperate with the Department. This stand, of the assessee was not found to be false by the Department. As could be seen from the decision of the Indore Bench of the Hon'ble Madhya Pradesh High Court in the case of CIT v. Suresh Chandra Mittal 241 ITR 124, the Explanation of the assesses that he has filed revised return to buy peace with the Department could be a bona fide explanation depending on the circumstances of the case and, thus, as per the proviso to Explanation (1), the onus shifts on to the department It may be noticed that the aforesaid decision of the Hon'ble Madhya Pradesh High Court was confirmed by the Apex Court(251 ITR 9)-SC, Similar view was taken by the Hon'ble Punjab and Harysna High Court in the case of M.M. Rice Mills(253 ITR 17), wherein the Court observed that though the onus to prove that there was no fraud or gross or willful negligence was on the assessee, yet the quantum of proof required to discharge that onus was that as required in a civil case, i.e. by preponderance of probabilities.
17. In the instant case, it cannot be said that the assesses has not tendered any explanation. The issue is whether the explanation offered by the assesses is bona fide or not. Explanation (1) of Section 271(1)(c) shifts the onus on to the Department, if the explanation of the assesses is found to be bona fide. The question whether the explanation of the assesses that he has filed revised returns to by peace and to avoid vexatious litigation, can be considered as a bona fide explanation or not, has to be examined in the back drop of the facts and circumstances of each case. Reverting to the facts of the assessee's case, there is nothing on record to suggest that for the assessment year 1997-98, the assessee has earned taxable income of Rs.2-lakhs, as assessed on the basis of revised return, as against income of Rs. 67,230 declared by the assessee in the original return. Similarly, for the other years also there is nothing on record to suggest that the income finally assessed was detected by the Department as the correct income of the assessee. Except stating that the details furnished by the assessee were cross-verified, there is no indication to the effect that the assessee has either inflated the expenditure or concealed the gross income. No doubt, when the assesses has revised the returns and declared the income in conformity with the statement given during the course of survey proceedings, there was no occasion for the Assessing Officer to point out that the Department has detected certain facts which would go to show that the assessee has not correctly declared income. But at least in penalty proceedings, where the assessee has given an explanation, the duty is cast upon the Revenue to highlight that the revised returns were filed not: merely to buy peace with the Department but on account of defection by the Revenue authority. Some facts and figures and estimated working is necessary to show that the material on records that the finally assessed income is the actual/probable income earned by the assessee. In the instant case, such an exercise having not been done by the Revenue authorities, in conformity with the decision of the Apex Court in the case of Satish Chandra Mitra (Supra), I am of the view that the assessing officer has not made our a case for the levy of penalty. I, therefore, cancel the penalties levied by the assessing officer, and allow the appeals of the assessee.
18. In the result, appeals field by the assessee are allowed.