Income Tax Appellate Tribunal - Chandigarh
Preet Land Promoters And Developers ... vs Acit, Mohali on 2 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'B', CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.760/Chd/2013
(Assessment Year: 2009-10)
P r e e t L a n d P r o m o te r s a n d Vs . A CI T
D e v el o p e r s P v t . L td . C i r c l e 6 (1 )
S e c . 8 6 , M o h al i M o h al i
P A N : AADCP8 89 3L
(Appellant) (Respondent)
Assessee by : Shri Vineet Krishan
Revenue by : Shri Manjit Singh
Date of hearing : 07.11.2017
Date o f P r o n o u n c em e n t : 0 2 / 0 2 / 2 0 1 8
ORDER
PER ANNAPURNA GUPTA, A.M.:
The present appeal has been preferred by the assessee against the order passed by the Commissioner of Income Tax (appeals), Chandigarh dated 29.04.2013, confirming the levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as Act).
2. Brief facts of the case are that a survey under section 133A of the Act was carried out at the business premises of the assessee company on 06.03.2009. During survey certain incriminating documents were found and impounded. From the analysis of these documents, it was found that the assessee company had received cash of Rs. 2.85 crores, which was not recorded in its books of accounts. In the statement recorded of Sh. Charan Singh Saini, director of the company, he admitted that these cash receipts were unaccounted and offered this amount for taxation in the hands of the company. Thereafter the assessee filed its return of income on 29.09.2009 but did not declare the said sum 2 of Rs. 2.85 crores, offered for taxation during the course of survey in its return of income. The assessing officer asked the assessee to explain regarding 'nil' income declared in the return of income and in response to the same the assessee submitted that the income surrendered during survey could be added to the taxable income. The assessing officer added this amount and initiated penalty proceedings under section 271(1)(c) of the Act. During the course of penalty proceedings the assessee submitted that the surrender was made due to some rough calculations mentioning the transactions which were not readily explainable at the time of survey. The assessee contended that they could at best be treated as advances against sale of property since the assessee company was following the project completion method and since the project was at the initial stage therefore the transaction could not have been the income for the year. The assessee stated that although there was no income but the surrender was made subject to no penal action and to cover-up discrepancies in the books of account and to buy peace with the Department and to avoid litigation and harassment. The assessing officer was not satisfied with the explanation of the assessee and levied minimum penalty for concealment on the ground that the assessee had failed to reflect the income disclosed at the time of survey in its return of income
3. During appellate proceedings the assessee filed written submissions reproduced at para 4 of the CIT (A) order contending that the surrender made by the assessee company should have been accepted or rejected in toto. That since the surrender had been made subject to no penalty the assessing officer could not have accepted the surrender but rejected the condition of no penalty being levied. It was also contended that that there was no malafide 3 intention to conceal tax , since the amounts represented in the transactions noted in the documents could not be treated as income of the assessee as its projects had not taken off as yet, yet the assessee had surrendered the said sum during assessment proceedings and paid taxes on the same. The Ld.CIT(appeal) after considering the assessees submission upheld the levy of penalty stating that the amount which was offered for taxation pertained to unaccounted cash receipts reflected in the incriminating documents found at the business premises of the assessee at the time of survey and on the basis of which income was offered for taxation and which issue had attained finality. Ld. CIT(appeal) held that there was no explanation offered by the assessee for non-inclusion of the impugned amount in the return of income. He therefore confirmed the penalty levied by the AO. The relevant findings of the CIT(A) at para 5 of his order is as under:
5. I have considered the submission of the Ld. Counsel. The penalty for concealment has been imposed in this case because the appellant did not declare the income offered for taxation at the time of survey in the return of income filed subsequently and agreed for addition of the surrendered amount, when questioned by the Assessing Officer in the scrutiny assessment proceedings. The amount, which was offered for taxation, pertained to unaccounted cash receipts reflected in the incriminating documents found at the business premises of the appellant at the time of survey and not recorded in the books of accounts. Income offered for taxation was on the basis of Annexures A-I, A-II, A-III, A-V, A-8, A-9 and A-12, impounded during the course of survey and so it cannot be said that there was no basis for disclosing the additional income for taxation. In any case, the issue regarding the taxation of the amount of Rs 2.85 crores has attained finality. Therefore, the question as to what method of accounting was being followed by the appellant has no relevance at this stage.
It cannot be out of place to mention here that the amount of Rs 2.85 crores was "surrendered" by the appellant subject to there being no penalty, but this cast a d u t y on the appellant to show this amount as its income in the return of income. There is no explanation, much less a justification, for the non inclusion of the impugned amount in the return of income. The appellant very well knew at the:
time of filing the return that the amount of Rs 2.85 crores was its taxable income and agreed to its inclusion in the taxable income during; the survey proceedings but, strangely, it did not declare it in its return of income. Once the appellant accepted that the income of Rs 2.85 crores, which was taxable, was kept outside the books of accounts, it was incumbent upon the appellant to include that income in the income declared in the return of income. The appellant agreed before the assessing officer that this income of Rs 2.85 crores may be brought to tax in its hards. Here the limited point is that the income of Rs. 2.85 crores which was accepted by the appellant as its income for the previous year, was not 4 shown in the return of income and for this non-inclusion, no explanation is offered by the appellant. Therefore, the case of the appellant is squarely covered by the provisions of Section 271(l)(c).
4. Aggrieved by the same the assessee has come up in appeal before us raising the following grounds:
1. That the order dt. 29.04.2013 passed by the Commissioner of Income Tax (Appeals) dismissing the appeal of the appellant and the original order dt. 29.06.2012 passed by the ACIT, Mohali levying the penalty of Rs. 96,87,150 are both bad in law and against the facts of the case.
2. That the Ld. CIT(A) has greatly erred in law and the facts of the case in interpreting the relevant sections of law in the present case in the wrong manner and in sustaining the penalty of Rs. 96,87,150.
3. That the Ld. CIT (A) has not appreciated the correct position of facts and law in passing his order and not appreciated the correct provisions of the Income Tax Act and that the penalty u/s 271 (1)( c) could not have been levied in the present case as per various court decisions.
4. That the penalty upheld by the CIT (A) is unjust, arbitrary, outside the scope of principles of natural justice and has been framed in haste and in utter disregard of all facts and norms of justice and deserves to be set aside since the issues relating to levy of penalty and correct position of facts and law have not been examined properly, appreciated and recorded by the authorities below;
5. That in view of the various judiciary pronouncements, the Appellant seeks permission to put forth detailed arguments in law and on the facts of the case and to add/delete amends any grounds of appeal at the time of hearing of the case.
5. Before us Ld. counsel for the assessee contended that identical penalty levied in earlier years,i.e A.Y 06-07 and 07-08 in the case of the assessee, had been deleted by the ITAT vide their order dated 29.04.2016 in ITA number is 581& 582/CHD/2012. Copy of the order was placed before us.
6. Ld. DR on the other hand relied on the order of the CIT(appeal).
7. We have heard the contentions of both the parties, perused the orders of the authorities below and gone through the orders referred to before us.
8. The facts with which emerge in the present case are that certain documents were found during survey on account of which assessee surrendered 2.85 crores during the year. The said income was not reflected in the return filed but offered to tax when confronted by the AO. This addition to 5 the income of the assessee has remained unchallenged in appeal. Undisputedly addition on account of the said income has been made and confirmed. Now looking at the explanation offered by the assessee for not including the same we find that the assessee had contended that being a builder, following project completion method of accounting, the said receipt did not constitute its income for the year since its projects had not been completed. The surrender made by the assessee stated so as under:
"Kindly refer to the proceedings in connection with the suney u/ s 133A of the Income Tax Act conducted by your office at the Business Premises of the above said assessee on 06.03.2009. In that regard it is mist humbly and respectfully submitted that after thorough investigation a i d enquiry, we found that certain documents and papers mentioning few transactions are not readily explainable or these are unexplained at the moment for the want of their documentary evidence.
To avoid further litigation or delay on our part and further more to buy peace of mind the we the directors on the behalf of Company have decided and agreed to offer the additional income as under:
Assessment Amount of Income Reference to
Year for
Additional
Income
AY 2006-2007 Rs. 1,00,00,000.00 Annexure 4
AY 2007-2008 Rs. 1,27,00,000.00 Annexure 4
A.Y. 2009-2010 Rs. 2,85,00,000.00 Annexure A-I, A-1I. A-
III, A-V, A-8, A- 9 AND
A-12
However it is further submitted that the above said amount received out of books is not a complete income of the Company as the Company has to deliver the product in future in return to this. However to buy peace of mind we have agreed and declared that this receipt/Income ii on additional income of the company during the respective year as mentioned above.
This offered income is additional income over the above the normal business income of the concern. The surrender is made subject to no penal action, prosecution or penal action at any later stage and to cover up other discrepancies in the books of accounts.
We further state that this is purely a voluntarily disclosure and we the directors, on behalf of Company offer this additional income as mentioned above, for taxation and without any pressure from the department other that the normal day to day enquiry.
This is further stated that I Charan Singh Saini, Director of the Company M/s Preet Land Promoters and Developers Private Limited, Mohali is fully competent to make this statement as per resolution made in the Board Meeting held on 31.03.2009 (copy of resolution is attached for your kind consideration)."6
9. Ld. counsel for the assessee further pointed out the said fact from the Notes to the Accounts forming part of its audited Balance Sheet and Profit and Loss account of the impugned year placed in the paper book at page number 23 stating the following significant accounting policies followed by the assessee with respect to "Inventories", "Sales and Other Income" and "Purchases":
INVENTORIES The Company has been incorporated with the object of developing Mega Housing Project and is in the process of Acquiring Land. Project Expenses incurred during the Year has been Added to inventory (Stock in Progress) Account.
SALES AND OTHER INCOME The Company is in the process of Development of Mega Housing Project. The Sale will commence only on completing of Development.
PURCHASES All amounts on account of payment for Land Purchases has been charged to Project Expenses Account.
10. Ld. DR has not controverted any of the above facts. The explanation offered by the assessee therefore is bonafide. Moreover there is no finding by the Department that the sum was the income of the assessee and we find that the addition has been made solely on account of the fact that it was surrendered. In such circumstances we hold that no penalty under section 271(1)(c) is leviable. As pointed out by the Ld.Counsel for the assessee, identical penalty levied in the preceding years i.e; 2006-07 & 2007-08, on the income surrendered in those years of Rs. 1 Crore & 1.27 Crores, we find was deleted by the ITAT for the same reason holding at para 15 to 18 of its order in ITA No. 581 & 582/Chd/2012 as under:
15. There is another aspect to the present case. The assessee had maintained before the learned CIT (Appeals) that it is following project completion method for revenue recognition. On perusal of the copy of Balance Sheet for the relevant year, we see that there are no reserves and no profits recognized during the year. In the Notes of Accounts and Significant Accounting Policies, it has been mentioned specifically, as follows :7
"Sales & Other Income :
The company is in the process of development of Mega Housing Project. The sale will commence only on completing of development."
16. In view of the above also, it is quite clear that in fact, no income accrued to the assessee during the relevant assessment year. Though it is also a matter to be deliberated upon that there were certain amounts jotted down on the seized documents, which were not explainable by the assessee. However, none has gone into to find the nature of these figures, in view of the fact that the assessee itself surrendered certain amounts and paid due taxes thereon. In the absence of a categorical finding by the Department that the surrendered amount was in the nature of income, the penalty under section 271(l)(c) of the Act cannot be levied.
17. For this, we are guided by the judgment of the Gujarat High Court in the case of National Textiles Vs. CIT (2001) 249 ITR 125 (Guj), whereby while explaining the scope of Explanation-1 to section 271(l)(c) of the Act, the Hon'ble Court stated that no penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If the assessee gives an explanation, which is unproved but not disproved, i.e. it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the Explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee. This ratio has also been affirmed by the Hon'ble Supreme Court in the case of Mak Data (P) Ltd. (supra), where in para 7,a t the end the Court states as under :
"Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question constituted the income and not otherwise."
18. In the absence of any material to show that the amount surrendered by the assessee in the facts and circumstances of the case, was in the nature of income in its hands, the penalty on the same is not leviable.
11. In view of the above we hold that no penalty u/s 271(1)© is leviable in the present case.
12. In the result appeal of the assessee is allowed.
Order pronounced in the Open Court.
Sd/- Sd/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 02/02/2018 *Rati*/AG Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) 4. The CIT 5. The DR