Income Tax Appellate Tribunal - Ahmedabad
Kailashbhai Ambalal Shah, Ahmedabad vs Assessee on 10 June, 2008
-1-
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "D" AHMEDABAD
Before S/Shri Bhavnesh Saini, JM and D.C.Agrawal, AM
ITA No.2956/Ahd/2009
Asst. Year :2006-07
Shri Kailashbhai Ambalal Vs. Income-tax Officer, Ward
Shah, c/o Anupam Met. & 11(3), Ahmedabad.
Engg. Works, 10,
Mahashakti Industrial
Estate, Nr. Anil Starch,
Ahmedabad
(Appellant) (Respondent)
..
Appellant by :- Shri S. N. Divetia, AR
Respondent by:- Shri S. K. Meena, Sr.DR
ORDER
Per D.C. Agrawal, Accountant Member.
This is an appeal filed by the assessee against the order of ld. CIT(A) wherein he has confirmed the levy of penalty of Rs.9,30,805/-. The assessee has raised following grounds :-
1.1 The order passed u/s 250 by CIT(A) XVI on 4.9.2009 confirming penalty of Rs.9,30,805/- levied by AO u/s 271(1)(c) on 30.1.2009 for Asst. Year 2006-07 is wholly illegal unlawful and against the principles of natural justice.
1.2 The ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the explanations furnished and the evidence produced by the appellant with regard to the impugned penalty.ITA No.2956/Ahd/2009
Asst. Year 2006-07 2.1 The ld. CIT(A) has grievously erred in law and or on facts in upholding that the appellant had deliberately concealed particulars of income with regard to interest income for Rs.4,73,305/- and investment in fixed deposits for Rs.22,78,000/-
2.2 That in the facts and circumstances of the case as well as in law, the ld. CIT(A) ought not to have held that the appellant had filed invalid revised return of income and it was not voluntary.
2.3 The ld. CIT(A) has grievously erred in holding that the revised return was neither valid nor filed for a bona fide omission.
2.4 The observations made and conclusion reached by the CIT(A) so as to confirm the penalty u/s 271(1)(c) are not admitted by the appellant in so far as the same are contrary to the facts on record or prejudicial to the appellant.
2. The facts of the case are that assessee is earning income from interest and share from partnership firm. He filed return of income on 30.11.2006 showing total income at Rs.3,60,800/-. It was processed under section 143(1). In this return assessee had shown interest income of Rs.129/- only. Subsequently the AO received information from Bank of Baroda as a part of routine annual information return (AIR in short) filed by the bank for Financial Year 2005-06 wherein it was found that assessee had received interest income of Rs.4,46,379/- during this year. The AO had also picked up the case for scrutiny assessment by issuing notices under section 143(2) on 26/6/07. Further notice under section 142(1) was issued on 7.4.2008. On the basis of annual information return received from Bank of Baroda, the AO issued a show cause notice to the assessee on 12.5.2008 whose relevant part is reproduced below :-
2 ITA No.2956/Ahd/2009Asst. Year 2006-07 ".......This is in continuation to this office notice u/s 143(2) issued on 26.06.07 which is duly served. Notice u/s 142(1) was issued on 1.4.2008 and the hearing conducted. You are requested to submit the remaining details and clarify the following :
(1) On the basis of the information received in this office through the AIR return filed by Bank of Baroda and counter verified with Bank of Baroda, it is seen that you have earned the following interest income during the relevant financial year.
Sl.No. Details Date of Amount
transactions
1. Bank of Baroda 1.8.2005 5,389/-
2. Bank of Baroda 23.8.2005 61,109/-
3. Bank of Baroda 28.9.2005 77,543/-
4. Bank of Baroda 28.9.2005 77,282/-
5. Bank of Baroda 28.09.2005 8,598/-
6. Bank of Baroda 28.9.2005 19,331/-
7. Bank of Baroda 28.9.2005 986/-
8. Bank of Baroda 28.9.2005 1,751/-
9. Bank of Baroda 28.9.2005 2,820/-
10. Bank of Baroda 28.9.2005 16,695/-
11. Bank of Baroda 8.10.2005 2,665/-
12. Bank of Baroda 31.10.2005 12,497/-
13. Bank of Baroda 19.12.2005 11,719/-
14. Bank of Baroda 19.12.2005 9,549/-
15. Bank of Baroda 19.12.2005 9,549/-
16. Bank of Baroda 19.12.2005 11,444/-
17. Bank of Baroda 16.01.2006 30,746/-
18. Bank of Baroda 4.2.2006 5,610/-
19. Bank of Baroda 24.3.2006 1,073/-
20. Bank of Baroda 24.3.2006 2,898/-
21. Bank of Baroda 24.3.2006 8,585/-
22. Bank of Baroda 24.3.2006 8,677/-
23. Bank of Baroda 24.3.2006 12,266/-
24. Bank of Baroda 24.3.2007 20,327/-
25. Bank of Baroda 24.3.2006 27,270/-
Thus, there is interest received of Rs.4,46,379/- which has not been offered for taxation. You are hereby asked to show cause as to why the said income should not be brought to tax............."3 ITA No.2956/Ahd/2009
Asst. Year 2006-07 Also the assessee was requested to show cause the following vide notice u/s 142(1) dtd.12.5.2008.
"(2)...........The information received and counter verified with Bank of Baroda also reveals an investment of Rs.22,79,000/- in fixed deposits with the bank of Baroda. The said investment is not reflected in the return of income filed. Kindly show cause as to why the same should not be added to your income as unexplained investment........"
After receiving this notice the assessee furnished a reply to the AO on 10.6.2008 which for the sake of convenience is reproduced as under :-
"To The Income-tax Officer, Ward 11(3), Ahmedabad.
Dear Sir, Ref: No.Wd 11(3)/14291)/KAS-83/2008-09 dt.12.5.2008 Sub: Assessment proceeding for Asst. Year 2006-07 Please refer to the above. In this connection, we have to state as under :-
→ That my father is a senior citizen of the age of about 70 years and all his financial transactions & filing of return etc. are taken care by me, the son of assessee. In the year under consideration also, the details of return was provided by me. Due to his age, he is also suffering from some age related illnesses. In the year under consideration, at the time of ending also he did have blood clout in his brain. Due to which he could not remember anything properly and could not identify the persons properly. He also got check up and Brain CY Scan etc. at that time the copy of the check up reports are also enclosed herewith. Due to his age and his health he was not able to work properly whether physically or mentally.
→ Further stated that we are not maintaining books of accounts therefore no personal balance sheet etc. is prepared by us and consequently we have not filed balance sheet along with return of income. We have filed return of income on the basis of copy of account from the firm in which he was a partner and on the basis of statement of broker. As stated earlier by us, the return of income 4 ITA No.2956/Ahd/2009 Asst. Year 2006-07 etc. was prepared by the son of assessee and he only considered the income from partnership firm and others (as stated above) which was in his knowledge. He was not aware of any old investments in the name of assessee and also of any income thereon.
→ With respect to assessment of the above concerned year, we hereby respectfully submit that there was an income from Bank FD interest of Rs.473305/- as against the amount of interest income of Rs.446379/- as shown by you in your notice u/s 142(1) of the Act. Therefore we are surrendering herewith the total exact amount of FD interest income for the year under consideration.
→ Further submitted that the assessee is of the age of 70 years and doing business for last 35/40 years. During this period the assessee made small amount of fixed deposits out of some saving from household withdrawals and some small receipts out of social customs etc. The savings made by assessee in small amounts from year to year and the interest was added to that. Thus the small amounts investment by assessee did have a cumulative effect. The investments were in very small amounts and of very older times. Due to his high age and having diseases (as stated in para 1), he was not in a position to recall the same and the son did not have an idea of such small investments made by father in earlier years. Now to buy peace, to avoid litigation and to co-operate the department, we are surrendering an amount of Rs.2278000/- for Asst. Year 2006-07 as income. We are surrendering the above income i.e. Rs.473305/- on a bona fide belief that no penal action would be taken against us and looking to the age and our object to co-operate the department, no penalty would be leviable. It is respectfully submitted that the assessee is a senior citizen and paying taxes and filing returns of income for last 35/40 years and there are no dues in the name of assessee in the Income-tax Department. The assessee is hereby surrendering the income as above to buy mental peace and to co-operate department and to avoid litigation. The assessee has already paid the tax of Rs.11,54,700/- due after considering the above surrender of the income on 4.6.2008 vide challan no.00007 with Bank of Baroda BSR code 0200327. The copy of receipt of tax paid is enclosed herewith. We are also enclosing herewith the revised return for the year after considering the above income surrendered and also the claim of TDS deducted by payer and taxes paid as above along with the statement of total income, original TDS certificates and proof of payment of taxes.5 ITA No.2956/Ahd/2009
Asst. Year 2006-07 → Further stated that TDS of Rs.48277/- has been deducted by the payer bank on Bank FD interest of Rs.473305/- paid to the assessee in the year under consideration. The said FD interest income has been surrendered by us for Asst. Year 2006-07 as above and will be interest income for Asst. Year 2006-07. Therefore we request you to please give the credit of the same TDS certificates in accordance with section 199 of the Income-tax Act. According to the section, "Any deduction made in accordance with the foregoing provisions of this chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made." The TDS certificates are enclosed herewith for giving credit.
→ Further it is respectfully submitted that the assessee has paid the whole tax due along with interest applicable after considering the surrender or income as above. Looking to his assessment history, his age, his health etc. and his motive to co-operate the department in each and every proceedings, no penalty under the act should be levied. Your Hon.'s kind reference is invited to the section 273A of the Act according to which "if the authority is satisfied that the assessee has co-operated in any enquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under this act in respect of relevant assessment year."
In our case we have already paid all the taxes and interest thereon in consequence of completion of the assessment for the year under consideration, therefore no penalty should be levied under the act.
We hope that you would find the above details/information in order as required by you.
Thanking you, Yours faithfully, For Kailashbhai Ambalal Shah Sd/- Pradip Jain Advocate."
6 ITA No.2956/Ahd/2009Asst. Year 2006-07
3. The AO had carried out an enquiry with Bank of Baroda and received information on 10.5.2008 showing the amount of FD made by the assessee to the extent of Rs.22,78,000/- and interest income earned thereon at Rs.4,46,379/-. Along with the reply dated 10/6/2008 the assessee submitted a return on that date itself enclosing therewith a challan of Rs.11,54,700/- being taxes paid on 4.6.08 and also declaring therein the income of Rs.22,78,000/- being investment in FDRs. Assessee also claimed this return filed on 10/6/2008 as revised return. The AO in the assessment order passed on 9.7.08 did not accept the return as revised return on the ground that it was filed beyond statutory time limit prescribed under section 139 of the Act. Further he held that return so filed is not voluntary as the department has already detected the concealment. Relying on the decision of Hon. Kerala High Court in Indian Cloth Depot vs. CIT (1988) 173 ITR 330, of Karnataka High Court in the case of CIT vs. Sudharshan Silks and Sarees (2003) 253 ITR 145 and that of the Tribunal in the case of Smt. Neetaben Tribhavandas Patel vs. ITO 88 ITD 202, the AO proposed an addition of unaccounted interest income of Rs.4,73,305/- and the undisclosed investment in FD of Rs.22,78,000/-. He also initiated penalty proceedings under section 271(1)(c). The assessment order so framed including therein the investment in FD and interest income thereon was not contested. During the course of penalty proceedings the assessee furnished reply dated 9.1.09 which reads as under :-
".........That assessee is a senior citizen of the age of about 70 years and all his financial transactions and filing of return etc. are taken care of his son of assessee. In the year under consideration also, the details of return was provided by his son. Due to his age, he is also suffering from some age related illnesses. In the year under consideration at the time of ending also he did have blood clout in his brain. Due to which he could not remember anything properly and could not identify the persons 7 ITA No.2956/Ahd/2009 Asst. Year 2006-07 properly. He also got check up and brain CT scan etc. at that time, the copy of the check up reports are also enclosed herewith. Due to his age and his health he was not able to work properly whether physically or mentally.
Further stated that I am not maintaining books of accounts therefore no personal balance sheet etc. is prepared by us and consequently we have not filed balance sheet along with return of income. We have filed return of income on the basis of copy of account from the firm in which he was a partner and on the basis of statement of broker. As stated earlier by us, the return of income etc. was prepared by the son of assessee and he only considered the income from partnership firm and others (as stated above) which was in his knowledge. He was not aware of any old investments in the name of assessee and also of any income thereon. It is respectfully submitted that the assessee is a senior citizen and paying taxes and filing returns of income for last 35/40 years and there are no dues in the name of assessee in the Income-tax Department. The assessee is hereby surrendering the incomes as above to buy mental peace and to co-operate department and to avoid litigation. To buy peace, to avoid litigation and to co-operate the department, we have surrendered the amount as above as income. We surrendered the above income i.e. Rs.4,73,305/- being Bank FD Interest and Rs.22,78,000/- totaling Rs.27,51,305/- on a bona fide belief that no penal action would be taken against us and looking to the age and our object to co-operate the department, no penalty would be leviable.
Further it is respectfully submitted that the assessee has paid whole tax due along with interest applicable after considering the surrender of income as above during the course of assessment proceedings itself. Looking to his assessment history, his age, his health etc. and his motive to co operate the department in each and every proceedings, the assessee hereby plead that no penalty under the act should be levied....."
The assessee also relied on following judgments:-
CIT vs. Nuruddin & Brothers (1990) 185 ITR 481 (Cal) Sir Shadilal Sugar and General Mills Ltd. vs. CIT (1987) 168 ITR 705 CIT vs. S.I. Paripushpam (2001) 249 ITR 550 (Mad) Sahinder Singh & Bros. vs. CIT (1980) 121 ITR 834 (P& H) Gumani Ram Siri Ram's case (1971) 85 ITR 67,69 (Punj._ CIT vs. Anwar Ali (1970) 76 ITR 696 8 ITA No.2956/Ahd/2009 Asst. Year 2006-07
4. The AO, however, did not agree with the contention of assessee that disclosure is voluntary and was to buy peace. According to him concealment has been detected by the department and, therefore, it is a fit case for levy of penalty. The AO accordingly levied penalty of Rs.9,31,000/- 100% of the tax sought to be evaded. The ld. CIT(A) confirmed the levy of penalty by holding that -
(1) On the date of filing of original on 30.11.2006, the assessee was not so seriously ill or critical. He was discharged from hospital on 6/3/2006.
(2) Interest income was credited in the account of assessee on various dates and TDS was deducted on payment of such interest. There were several transactions of such deductions of tax and transfer of interest income to the account of assessee. Total number of transactions were about 32 as per list given on pages 13 & 14 of CIT(A)'s order. Such TDS was made on 9 different dates.
(3) Filing of return on 10.6.08 is neither voluntary nor valid u/s 139(5).
A valid revised return could be filed only upto 31.3.08.
(4) The so called revised return was filed after the AO issued a show cause notice to the assessee on 12.5.08. The assessee has not disclosed material fact regarding his FDR investment and interest thereon in the original return and assessee has not proved that there was any bona fide in not making such declaration.
5. The ld. CIT(A) relied on the following judgments -
a) In the case of JKA Subramania Chettiar 110 ITR 602 (Mad)
b) In the case of Radhey Shyam 123 ITR 1125 (All)
c) In the case of Sunanda Ram Deka 124 CTR (Gau) 48
d) In the case of Amjad Ali Nazir Ali 110 ITR 419 (All)
e) Of Hon. High Court of Gauhati in 102 ITR 408 (Gau)
6. Before us the ld. AR for the assessee made following submissions :
(i) The assessee was seriously ill and was hospitalized. Original return on 30.6.06 was signed by assessee's son Shri Hemu Shah. The assessee was 9 ITA No.2956/Ahd/2009 Asst. Year 2006-07 suffering from right side body paralysis in the hospital from 4.3.06 to 6.3.06. CT scan of brain was done. The report of the Doctor is as under :-
Sterling Hospital Radiology Department Ahmedabad Name :Kailashbhai Shah F/70 yrs. Date 03/03/2006 Ref By : Dr. Shalin Shah "CT Scan of Brain (Pain) The study reveal evidence of mild dilatation of ventricular system, basal cisterns, cerebellar folia and cortical sulci-suggest age related cerebral and cerebellar atrophic changes.
Well-defined wedge shaped extremely hypodense area noted in left posterior parital lobe -suggest old infarct with gilotic changes.
Small hypodense areas noted in left frontal lobe involving periventricular deep white matter and caudate nucleus -suggest old infarcts.
Lacunar infarcts noted in Centrum semiovale on either sides and left frontal lobe.
Ventricular system and basal cistems other wise appear normal. Mega cistema megna is noted.
There is no shift of midline structures.
Cerebellum and brainstem otherwise appear normal.
No evidence of subdural, extradural or intraparenchymal haemorrhage is seen.
Bony skull vault appears normal.
To be correlated."
The original return of income was prepared by assessee's son who did not know about the bank deposits. It was known to him after receipt of query letter from the AO. The details were collected from the bank and revised 10 ITA No.2956/Ahd/2009 Asst. Year 2006-07 computation of income was submitted to the AO. Interest income was not received but only credited in the bank and, therefore, son was actually not knowing.
(ii) Merely receiving information from Bank of Baroda in the annual information return does not amount to any discovery of undisclosed income. The AO cannot form any prima facie satisfaction as to the said income whether it was undisclosed or not.
(iii) Since assessee was almost not knowing what was filed in the original return he could not be charged for any contumacious conduct.
(iv) Assessee is not maintaining any books of account and no personal balance sheet is prepared therefore, son could not know the actual financial position of the assessee. The son only considered the income from partnership firm. He was not aware of any investment made by the assessee.
(v) The assessee is a senior citizen of the age of 70 years and doing business for last 35/40 years. The assessee had made savings out of household withdrawals and small receipts out of social customs. All these receipts had grown up to this extent. However, to buy peace and to co-
operate with the department assessee has surrendered entire investment made in FD and interest income therefrom and paid taxes thereon forthwith. It reflects the bona fide of the assessee.
(vi) Omission to include interest income from Bank of Baroda and investment made therein was not intentional or deliberate act on the part of the assessee 11 ITA No.2956/Ahd/2009 Asst. Year 2006-07
(vii) Since AO could not arrive at any satisfaction about concealment by the assessee merely on the basis of annual information report received from Bank of Baroda, the disclosure made by the assessee in the return filed on 10.6.08 should be treated as voluntary.
7. (i) On the other hand, the ld. DR submitted that assessee was hospitalized only for few days in March, 2006. He continued to carry on business in the firm from where share income has been earned. The assessee himself filed the so called revised return on 10.6.08.
(ii) The Bank is making TDS on payment of interest and sending regular intimation to the assessee. Therefore, it cannot be said that his son and power of attorney holder was knowing about FD made in the Bank and interest income earned therefrom.
(iii) The ld. DR further submitted that deposits were in the beginning of FY 2005-06. At that time there is no evidence that assessee was ill. Regular credit of interest in the bank account cannot be said to be not in the knowledge of assessee. Further investment in FD was made to earn interest, therefore, earning of interest from the FD in the knowledge of the assessee.
(iv) The ld. DR thus submitted that return filed on 10.6.08 cannot be a revised return as time required to file a revised return had expired. Therefore, assessee cannot get the benefit of disclosure in the revised return. Such disclosure is also not voluntary as it was made after issuance of show cause notice by AO on 12.5.08.
12 ITA No.2956/Ahd/2009Asst. Year 2006-07
8. We have considered the rival submissions and perused the material on record. All the issues arising from the above facts and arguments made by the parties are discussed as under :-
I. The first issue is whether assessee can be exonerated from responsibility of declaration of interest income and investment in FDR in the return filed on 30.11.06, signed by his son, Shri Hemu Shah. As per undisputed facts assessee had made investment of unaccounted money in the Bank of Baroda amounting to Rs.22,78,000/- somewhere in April/May, 2005 (exact date of deposit is not informed to us) and had earned interest income thereon which are credited by the Bank of Baroda in the savings account of the assessee and TDS was made thereon as per details given by the ld. CIT(A) on pages, 12,13 & 14 of the impugned order. The assessee submits that he was ill, hospitalized for couple of days in March, 2006. He had to undergo CT scan of the brain, but it was in September, 2008. However, the assessee continued to enjoy share income from partnership firm and he attended all other necessary family duties and business. It was not a case that assessee was not able to communicate with any of his family member including his son or it is not a case where son of the assessee has certified or filed an affidavit that return of income on behalf of assessee was filed without the knowledge of the assessee. No such claim has been made. Even otherwise, for the sake of argument if it is accepted that return of income by the son filed on 30.11.06 was without the knowledge of the assessee then between 30.11.06 and 12.5.08 there must be enumerable occasions when filing of return by the son of the assessee would have been discussed and so also the fact of non-disclosure of investment in FDs and interest income earned thereon. Onus is heavily on the assessee and his son to lay evidence before the AO or before the ld. CIT(A) or before us that return 13 ITA No.2956/Ahd/2009 Asst. Year 2006-07 of income by son was filed without the knowledge of the assessee and son of the assessee had no occasion to discuss the details of what has been filed in the return and that assessee had also no occasion to disclose to the son the fact of making of FDR and interest earned thereon. It is a claim of the assessee that power of attorney was executed by the assessee in favour of his son Shri Hemu Shah on 3.3.06 to carry out or execute all the work on his behalf. We are surprised how such power of attorney could be executed when assessee was claimed to be admitted in the hospital on that date. Notwithstanding it is the duty of the power of attorney holder to enquiry and collect all the material facts before filing of the return on behalf of the assessee. If it is not so done even power of attorney holder is guilty of contumacious conduct in not declaring correct income in the return filed on behalf of the assessee. Further, no case is made out by the assessee or by ld. AR that right from 3.3.06 till 30.11.06 when the original return was filed, there was no communication between the assessee and his son resulting in filing of any adhoc return. Similarly no case is made out that still there was no communication between assessee and his son, the power of attorney holder, between 1.12.06 till 31.3.2008 being the time available to file revised return suo motto. There is no such claim and therefore, we believe that whatever has been filed on 30.11.06 was with full knowledge, awareness and consent of the assessee.
May be, the return was filed, as claimed, by the power of attorney holder Shri Hemu Shah, the son of the assessee, there is clearly a non-disclosure of investment in FDs and interest income therefrom. The assessee cannot exonerate himself from the charge of penalty, as it is not proved that he is not aware as to what power of attorney holder is filing. If an assessee is exempted from levy of penalty solely on the ground that his agent, power of attorney holder, or guardian filing return on his behalf is not aware about correct income or investment liable to be taxed, as claimed in the 14 ITA No.2956/Ahd/2009 Asst. Year 2006-07 present case, then a disorderly condition is likely to emerge where tax payers will be prompted to file untrue return through their agent, power of attorney holder or guardian without there being any accountability of any one. Basic structure of tax-system will shake which requires an assessee to declare true and correct income in the return. Therefore, even if return of income is filed by agent, or power of attorney holder or guardian, the assessee has to bear the consequences of an untrue return, unless there are other satisfactory reasons. Our view also is supported by the decision of Hon'ble Karnataka High Court in Master Sunil R.Kalrao (2007) 292 ITR 86 (Kar) wherein Hon. Court observed "if the view that since the beneficiary himself does not file the return, he would not come within the ambit of the expression "his income" as appearing in section 271(1)(c) of the Act, is accepted, that would result in the representative acting contrary to the statute and getting over the levy of penalty. A reasonable interpretation has to be given with a view to achieve the object of the Act. The object of the Act is to obtain returns with accurate particulars of the purpose of levy of tax.". Hon. Madras High Court in G.K. Ravi vs. CIT (1999) 235 ITR 208 (Mad) confirmed the levy of penalty u/s 271(1)(c) on the assessee for delay in filing the return by the representative of the assessee. It held that u/s 160 the guardian of the minor and all representative assessees are deemed to be an assessee for the purpose of the Act. Similar view was also expressed by Hon. Madras High Court in CIT vs. R. Srinivasan (1997) 288 ITR 214 (Mad). Accordingly, we hold that assessee cannot be exonerated from charge of penalty merely because original return on 30.11.06 was filed by his son Shri Hemu Shah who was only a power of attorney holder.
15 ITA No.2956/Ahd/2009Asst. Year 2006-07 II. The next issue is whether the AO had not arrived at the satisfaction of concealment of income and, therefore, the disclosure by assessee in the return on 10.6.08 was voluntary.
In our considered view the question as to whether AO arrived at the satisfaction about assessee concealing income can be answered by carefully reading the assessment order. When the AO had passed his order under section 143(3) on 9.7.08 he had clearly mentioned "issue show cause notice for levy of penalty under section 271(1)(c) of the Act for concealment of income and furnishing of inaccurate particulars of income. On page 8 of his order he has mentioned income surrendered by the assessee partakes the nature of undisclosed and unaccounted income......"
On page 7 of his order the AO mentioned "the unaccounted interest income for Rs.4,73,305/- and the undisclosed investment in the FD for Rs.22,78,000/- is added to the total income of the assessee." Penalty proceedings under section 271(1)(c) should also be initiated for concealment of income and non-disclosure of FD and interest income earned thereon.
On page 6 the AO mentioned that the "revised return of income has been filed by the assessee after the concealment on part of the assessee showing interest income and unaccounted investment was brought on record and intimated to the assessee." Thus there are ample narrations in the order passed by the AO clearly showing the satisfaction of the AO that assessee has concealed the particulars of income or furnished inaccurate particulars of income. Therefore, the question whether the AO had arrived at a satisfaction on 12.5.08 when he issued show cause notice to the assessee is not relevant. One has to see the 16 ITA No.2956/Ahd/2009 Asst. Year 2006-07 satisfaction in the assessment order and not prior to it. Prior to passing of assessment order is the stage of enquiry and investigation. At that stage the AO may have, satisfaction or may not have satisfaction about concealment of income made by the assessee. It is only the assessment order which is crucial in deciding about the satisfaction arrived at by the AO. Further, the provisions of section 271(1B) inserted by Finance Act, 2008 with retrospective effect from 1.4.89 takes care of such anomalies where AO does not record satisfaction in clear words but make addition to the total income. But in the present case there are clear and specific recordings of satisfaction about concealment committed by the assessee. Therefore, such arguments have no force and are rejected.
III. Another issue raised by the ld. AR is whether return filed by the assessee on 10.6.08 can be said to be revised return? In our considered view the return filed under section 139(5) alone can be said to be a revised return. Since time limit for filing return under section 139(5) had expired on 31.3.08 the return filed on 10.6.08 cannot be validly called a revised return. Hon. Supreme Court in Kumar Jagdish Chandra Singh vs. CIT (1996) 220 ITR 67 has held that returns filed beyond time prescribed under section 139(5) cannot be treated valid in law and cannot be acted upon as revised return as contemplated by sub-section (5) of section 139.
IV. One more issue raised by the ld. AR is whether return filed on 10.6.08 can be said to be voluntary? The return filed on 10.6.08 cannot be said to be voluntary. Primarily, such return is not valid return under section 139(5) and at best it can be treated as an information under the signature of the assessee submitted to the department. Even such information cannot be said to be voluntary because it was submitted when assessee was served notice under section 142(1) and also a letter dated 17 ITA No.2956/Ahd/2009 Asst. Year 2006-07 12.5.08, as reproduced above, by the AO informing the assessee that he has made deposits of Rs.22,78,000/- in the FD in Bank of Baroda and also earned interest income of Rs.4,46,379/- thereon. It was in fact this definite information in possession of the AO which prompted the assessee to declare the undisclosed investment and interest thereon, as his income in the information submitted to the AO on 10.6.08 in the form of a return which we have held was not valid in law. The word "voluntary" means something out of own volition without being prompted by any enquiry by any departmental authority, something which is a result of realization of omission or mistake in the original return filed by the assessee and not as a result of discovery made by the department that assessee has concealed the investment and income earned therefrom. Our view that returns filed after enquiries made or discovery of concealment made by the department would not be voluntary, is supported in following decisions -
(i) CIT vs. Mahabit Prasad Bajaj (2008) 298 ITR 109 (Jhar) - incriminating documents were found in the search. Revised return was filed disclosing higher income. Held that assessee did not act voluntarily and bona fide in filing the revised return and offering additional income.
(ii) CIT vs. A. Sreenivasa Pai (2000) 242 ITR 29 (Ker) -revised return was filed after books of accounts had been impounded for scrutiny. Hon. Kerala High Court held that a return filed under section 139(5) can be held to be revised, if (a) omission or wrong statement that might have occurred or crept in such omission or wrong statement must be bona fide. It must have been discovered by the assessee himself and, if however, the omission or wrong statement is discovered by the department as a result of enquiry and thereafter a revised return is furnished making amendments, that will not amount to a revised return as contemplated 18 ITA No.2956/Ahd/2009 Asst. Year 2006-07 under section 139(5). SLP against this decision filed by the assessee was dismissed by Hon. Supreme Court in A. Sreenivasa Pai vs. CIT (SLP C No.5462 of 2000).
(iii) Biland Ram Hargan Dass vs. CIT (1988) 171 ITR 390 (All) wherein revised return was filed after detection of concealed income in the search then surrender of income in the revised return would not be voluntary. There was no bona fide, inadvertence or omission.
(iv) CIT vs. Mohd. Mohtram Farooqui (2002) 177 CTR 434 (Raj) - Revised return was filed after seizure of cash from the premises of the assessee. Levy of penalty under section 271(1)(c) was held justified as the revised return was not treated as voluntary.
(v) K.P. Madhusudan vs. CIT (2001) 251 ITR 99 (SC) - A revised return was filed after search and seizure where cash and jewellery and certain documents were seized. It was claimed that there was no concealment and it was for buying peace that additional income has been disclosed and revised return has been filed. The Tribunal cancelled the penalty relying on the judgement of Hon. Supreme Court in Sir Shadilal Sugar & General Mills & Anr. vs. CIT (1987) 168 ITR 705 (SC). Hon. Supreme Court held that assessee had offered no explanation except asserting that disclosure was made only to buy peace. It was held that after insertion of explanation in section 271(1)(c) the decision in Sir Sadilal Sugar & General Mills vs. CIT (supra) case is no longer good law. If assessee does not prove that his failure to return correct, income was not due to fraud or neglect (as per law applicable in the relevant Asst. Year) he shall be deemed to have concealed the particulars of income and consequently will be liable to penalty under section 271(1)(c).
19 ITA No.2956/Ahd/2009Asst. Year 2006-07
(vi) In CIT vs. Lallubhai Jogibhai Patel (2003) 261 ITR 216 (Guj), it was held by Hon. Court that where assessee admits of concealment of particular amount, the Tribunal would be justified in levying the penalty. The assessee was found having a mercedese car whose investment was not disclosed in the return. A sum of Rs.65,000/- was treated as investment which was scaled down to Rs.56,000/- but assessee stated to have invested Rs.31,000/- only. Once there was admission of investment to the extent of Rs.31,000/- the levy of penalty was not justified.
(vii) Agarwal (F.C.) vs. CIT (1976) 102 ITR 408 (Gau) As a proposition of law it may be correct that where a revised return as contemplated under section 139(5) is submitted before the assessment is made after the assessee had discovered some omission or some wrong statement in the original return, a penalty proceeding for concealment of the particulars of income or furnishing inaccurate particulars of such income as contemplated under section 271(1)(c) of the Act may not be attracted. But, for that purpose, the revised return itself must be within the correct ambit and scope of section 139(5). In the present case, no doubt, the discovery of the omission or wrong statement was made by the assessee. That by itself is not sufficient to bring the revised return within the ambit of section 139(5). The further requirement is that this omission or wrong statement in the original return must be due to bona fide inadvertence or mistake on the part of the assessee. The assessee in this case should not give any particular basis for the original returns. The contention of the assessee that he had no accounts notwithstanding the admitted fact that he had incomes in lakhs of rupees was rightly rejected by the Tribunal. In the circumstances, the omissions or wrong statements in the original returns, as admitted by the assessee, could not be stated to 20 ITA No.2956/Ahd/2009 Asst. Year 2006-07 be, by any standard of evaluation of evidence or material on record, inadvertent or bona fide omission or mistake. That being so, the revised returns were not really within the correct ambit and scope of section 139(5) of the Act so as to allow immunity to the assessee from the mischief of section 271(1)(c) of the Act.
(viii) Sunanda Ram Deka vs. CIT (1994) 210 ITR 988 (Gau) The filing of the revised return after discovery of the omission or wrong statement is not by itself sufficient to bring the revised return within the ambit of sub-section (5) of section 139 of the Income-tax Act, 1961. The further requirement is that this omission or wrong statement in the original return must be due to bona fide inadvertence or mistake on the part of the assessee.
Held,_ that it could be seen that from the original return there had been a staggering difference in the second revised return filed and no particulars had been pointed out to explain that the revised returns were merely the result of inadvertent mistake or omission. In that view the Tribunal had come to a definite conclusion that there was no material to support the view that there was any omission, mistake or wrong statement in the original return. This was a finding of fact and no question of law arose.
V. Next issue coming up for discussion is whether any element of mens rea involved in the present case ?
Once the assessee had made deposits in the bank account somewhere in early 2005 he knew it very well that it was for earning interest income and further that it is not accounted for, and not declared to the department. Had it been otherwise some plausible explanation supported by material evidence would have been presented to the AO. Secondly when assessee says that he was seriously ill and was hospitalized then it 21 ITA No.2956/Ahd/2009 Asst. Year 2006-07 is not believable that details of the bank accounts in which such huge undisclosed investment was made was not known to his son or was not communicated to the son. As said earlier no contrary material in the form of affidavit from either of the two i.e. the assessee and his son about such unawareness of investment in bank and interest earned therefrom is filed. Thirdly, bank has been deducting tax at source while crediting interest income and there is always a procedure to communicate the deduction of tax to the assessee; at least at the end of the FY, if not periodically. No material has been furnished before us that the bank failed to communicate to the assessee about deduction of tax at source from the payment of interest which was credited in the savings account. Fourthly, when responsibility is given to the son as power of attorney holder then it is not possible to believe that he had not enquired about various interest income earned by the assessee including the one from Bank of Baroda. Our view is strengthened by the fact that interest income earned from another savings bank account, amounting to Rs.129/- was worked out and declared in the return filed on 30.11.06. Finally, there was ample time with the assessee from 30.11.06 to 31.3.08 to find out as to what has been declared in the return of income and what has not been and to correct the return originally filed after declaring the investment and interest thereon. In such circumstances, there could have been a case of holding that declaration was voluntary but not now after the issue of show cause notice by the AO on the basis of definite information. Accordingly, we are of the view that there was a mens rea involved in not declaring the investment and interest income therefrom in the original return filed on 30.11.06.
VI. The next issue is whether assessee has disclosed all the material facts in the return filed on 30.11.06? In our considered view no. It is 22 ITA No.2956/Ahd/2009 Asst. Year 2006-07 because investment in the bank and interest earned therefrom are important material facts for the purpose of computing income and if assessee does not disclose them in the original return the assessee would be guilty of contumacious conduct on which penalty under section 271(1)(c) is leviable for concealment of income and also for furnishing inaccurate particulars of income.
9. Now we discuss certain authorities referred to by the ld. AR.
(i) In CIT vs. Nuruddin & Brothers (supra) the assessee had furnished a voluntary disclosure petition under section 271(4A) disclosing therein the peak of cash credits. This disclosure petition was filed after assessment was complete pointing out to the Commissioner that cash credits introduced in the books in various names in different years represented his income which was not disclosed in the return. On that basis assessment was reopened and addition was made. The AO also levied the penalty but the Tribunal cancelled it on the ground that assessee disclosed the income to the department on its own volition and there was no concealment. Hon. Calcutta High Court held that in view of the disclosure petition filed under section 271(4A), the Tribunal was right in holding that no penalty under section 271(1)(c) was leviable on the assessee. Thus in this case there was a voluntary disclosure by the assessee and secondly the case pertained to Asst. Year 1960-61 i.e. prior to major amendments carried out w.e.f. 1.4.1964 and 1.4.1975. In view of the changes in the penal provisions this authority is of no help to the assessee.
(ii) Sir Shadilal Sugar & General Mills Ltd. vs. CIT (supra). This decision of Hon. Supreme Court has been discussed by us in para 8/ IV/V. It has been held by Hon. Supreme Court in K. P. Madhusudan vs. 23 ITA No.2956/Ahd/2009 Asst. Year 2006-07 CIT (supra) that the decision in Sir Shadilal Sugar & General Mills Ltd. vs. CIT (supra) is no longer a good law, in view of insertion of explanation to section 271(1)(c) of the IT Act, 1961 w.e.f. 1.4.1975. Accordingly this authority is of no help to the assessee.
(iii) CIT vs. Paripushpam (supra)- In this case addition was agreed by the assessee whose details were set out in enclosure filed along with the assessee's return of income. In respect of penalty proceedings it was held that there was no evidence with the department on the basis of which it could contend that assessee has fraudulently or willfully or neglectfully concealed the income. The assessee's agreeing to the addition of the amount by itself did not establish fraud or willful neglect without something more. Accordingly the penalty was cancelled. Thus in this case, department did not have in its possession any material other than assessee agreeing to the addition and secondly this case pertained to Asst. Year 1974-75. Thereafter major amendment has taken place in the law w.e.f. 1-4-1975 by way of insertion of explanation to section 271(1)(c). There is no requirement of AO establishing any fraud or willful neglect any more. This authority is also of no help to the assessee.
(iv) Sahinder Singh & Bros. vs. CIT (supra)- In this case assessee has agreed to an addition to total income for assessment purposes and there was no independent evidence that assessee has concealed the income. It was held by Hon. Court that penalty provisions in Income-tax act is quasi criminal in nature and, therefore, penalty provisions should be strictly construed. There should be clear finding by the competent authority after enquiries that a definite amount has been concealed by the assessee in the return of income. Where assessee admits to addition in order to avoid further litigation then resort to penalty proceedings cannot be taken. This 24 ITA No.2956/Ahd/2009 Asst. Year 2006-07 case pertained to Asst. Year 1964-65 and the department did not have in its possession any material except assessee agreeing for addition.
The facts in the present case before us and the law applicable to the assessee are quite different and, therefore, this authority is also of no help to the assessee.
(v) Gumani Ram Siri Ram vs. CIT (supra)- In this case AO has found cash deposit in squared up accounts in assessee's books. In the statement given by the assessee such squared up account was surrendered but there was no material on record to show that surrendered amount was assessee's income. It was held by Hon. Court that penalty cannot be levied unless there was material on record to show that surrendered amount was his income. Hon. Court relied on the decision of Hon. Supreme Court in CIT vs. Anwar Ali (1970) 76 ITR 696 (SC). This authority is also of no help to the assessee because it pertained to Asst. Year 1964-65 whereas the present case pertained to Asst. Year 2006-07 containing substantial changes now in the penal provisions. Further department had in possession the information about investment in FDR and interest income earned thereon.
(vi) CIT vs. Anwar Ali (supra)- this authority is no longer a good law now in view of the amendments made in section 271(1)(c). The AO is not required to establish any deliberate concealment or any fraud or any willful neglect on the part of the assessee.
Therefore, the authorities relied on by the ld. AR are no longer applicable to the facts of the present case and due to the changes in law.
25 ITA No.2956/Ahd/2009Asst. Year 2006-07
10. Now the question is whether explanation furnished by the assessee is satisfactory within the meaning of section 273? The explanation furnished by the assessee before the AO in assessment proceedings as well as in penalty proceedings was that he is a senior citizen of the age of 70 years and he was sick, hospitalized and his return was filed by his son as power of attorney holder. So far as these facts are concerned there is no dispute but this limited explanation is not satisfactory when viewed from totality of facts involved in the case and further that it cannot be said that non-declaration of undisclosed investment in FDs and interest earned thereon was bona fide. For an explanation to be satisfactory it has to be shown that every bit of information relevant to the explanation and in possession of the assessee has been disclosed during assessment proceedings. Secondly, circumstances surrounding the explanation must show that what is stated in the explanation could be reasonably accepted as happened. In the present case it is not shown that power of attorney holder was not aware about the deposits in the bank and interest earned thereon. Secondly it is not shown that the bank in fact has not communicated about the deduction of tax to the assessee or to the son of the assessee. Thirdly, the assessee has been actively involved in partnership firm earning share income therefrom. It cannot be said that he is not active in financial matter and, therefore, he was unable to communicate about the deposits in the bank and interest earned therefrom. Fourthly the assessee did not give any reason why only the bank interest of Rs.129/- was declared and not the major interest earned from undisclosed investment. Finally it is not explained as to why assessee chose to be silent between 30.11.06 to 31.3.08 and only woke up when the AO issued show cause notice intimating the definite information in his possession. We further find that papers of illness filed by the assessee indicated that he was confined to hospital from 3.3.06 to 26 ITA No.2956/Ahd/2009 Asst. Year 2006-07 6.3.06 (4 days). There is no information as to what happened between 7.3.2006 and 30.11.2006 or thereafter till 31.3.2008 and why he could not declare the investment and interest therefrom. It has nowhere been claimed that assessee was out of business. Once he is actively involved in the business in spite of claiming illness then there is no reason to hold that he was unable to file correct return of his income on 30.11.06. Accordingly, we hold that explanation furnished by the assessee is devoid of acceptance as it is not found satisfactory.
11. As a result, we hold that assessee has concealed the particulars of income by not declaring unaccounted investment in bank to the extent of Rs.22,78,000/- and by not declaring the interest income thereon amounting to Rs.4,46,379/-.
12. In the result, the appeal filed by the assessee is dismissed.
Order was pronounced in open Court on 12.11.10.
Sd/- Sd/-
(Bhavnesh Saini) (D.C. Agrawal)
Judicial Member Accountant Member
Ahmedabad,
Dated : 12.11.10.
Mahata/-
Copy of the Order forwarded to:-
1. The Assessee.
2. The Revenue.
3. The CIT(Appeals)-
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
Deputy/Asstt.Registrar
ITAT, Ahmedabad
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ITA No.2956/Ahd/2009
Asst. Year 2006-07
1.Date of dictation 20/10/2010.
2.Date on which the typed draft is placed before the Dictating 8/11/2010 Member................Other Member................
3.Date on which the approved draft comes to the Sr.P.S./P.S.............
4.Date on which the fair order is placed before the Dictating Member for pronouncement..............
5.Date on which the fair order comes back to the Sr.P.S./P.S...............
6.Date on which the file goes to the Bench Clerk...........
7.Date on which the file goes to the Head Clerk.............
8.The date on which the file goes to the Asstt. Registrar for signature on the order........................
9.Date of Despatch of the Order.................
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