Income Tax Appellate Tribunal - Delhi
Rajesh Kumar Batra, Sonepat vs Acit, Sonepat on 15 February, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'F' NEW DELHI
BEFORE SH. S.K. YADAV, JUDICIAL MEMBER
AND
SH. O.P. KANT, ACCOUNTANT MEMBER
ITA No. 2931/Del/2014
Assessment Year: 2010-11
Sh. Rajesh Kumar Batra, Prop. Vs. ACIT, Sonepat Circle, Sonepat
M/s. Batra Electric Store, Mama
Bhanja Chowk, Sonepat
PAN : ABDPK5518P
(Appellant) (Respondent)
Appellant by Sh. K. Sampath, Advocate
Respondent by Sh. F.R. Meena, Sr.DR
Date of hearing 17.01.2017
Date of pronouncement 15.02.2017
ORDER
PER O.P. KANT, A.M.:
This appeal by the assessee is directed against order dated 20/02/2014 of learned Commissioner of Income-tax (Appeals), Rohtak for assessment year 2010-11. The assessee is aggrieved with the levy of penalty of Rs.4,27,586/- under section 271(1)(c) of the Income-tax Act, 1961 (for short "the Act") by the Assessing Officer, which has been confirmed by the learned Commissioner of Income-tax (Appeals). The grounds of appeal raised by the assessee are reproduced as under:
i. On the facts and in the circumstances of the case and in law the authorities below erred in holding the assessee guilty of concealing the particulars of income and imposing penalty u/s 271(1)(c) of the Act.] ii. The action being arbitrary, erroneous and unjust must be quashed with directions for appropriate relief.2 ITA No. 2931/Del/2014
AY: 2010-11
2. The facts in brief of the case are that in the case of assessee a survey under section 133A of the Act was carried out on 04/03/2010. The survey party found following discrepancies:
(i) excessive stock of Rs.12,00,000/- found physically, as compared to stock recorded in books of accounts
(ii) excess cash of Rs.9,02,000/-,
(iii) excess investment of Rs.2,98,500/- in furniture and fixture
(iv) excess investment in renovation of shop amounting to Rs.18,01,920/-
(v) loose papers having entries of Rs.17,99,955/-
3. The Assessing Officer has noted that during the course of survey proceeding, the assessee accepted above discrepancies and surrendered the above amounts for taxation.
4. In the return of income filed for the year under consideration on 15/10/2010, the assessee, declared total income of Rs.49,92,720/- which included all the items of discrepancies except entries in loose papers, against which the assessee included income of Rs.4,16,220/- only. In the course of scrutiny proceedings, the Assessing Officer asked the assessee to explain each and every entry recorded in loose papers impounded during the course of survey and asked as to why the difference of Rs.13,83,775/- (i.e. Rs.17,99,955 - 4,16,220) in respect of entries in loose papers, might not be added. The assessee in his submission dated 24/05/2011 agreed for making addition of Rs.13,83,330/- on account of loose papers with a view to buy peace of mind and only to avoid any further litigation and harassment subject to no penalty and prosecution proceeding. The Assessing Officer accordingly made addition of Rs.13,83,775/- , however, initiated penalty 3 ITA No. 2931/Del/2014 AY: 2010-11 proceedings under section 271(1)(c) of the Act. During the penalty proceedings, the assessee submitted:
(i) that during the course of survey proceeding, the assessee surrendered a sum of Rs.60,03,015/- under pressure and to buy peace of mind, however, at the time of filing return of income the excess amount of Rs.13,83,330/-, which was surrendered on account of loose papers, was not included in the income due to debatable view of inclusion of margin of sales instead of total amount of sales included in the loose papers.
(ii) that to buy peace of mind and to avoid further litigation on the issue accepted the addition of Rs.13,83,330/- during assessment proceeding subject to the condition that no penalty or prosecution proceeding would be initiated against the assessee.
5. The Assessing Officer found no merit in the submission and held that it was a clear case of concealment of particulars of income and relying on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Zoom Communication (P) Ltd, levied the penalty under section 271(1)(c) of the Act of Rs.4,27,586/- vide his order dated 19/03/2012.
6. On appeal, the Ld. Commissioner of Income-tax (Appeals) observed that the assessee had ample time to explain each and every entry in the loose papers as had been asked by the Assessing Officer and he was under no pressure at the time of assessment proceeding to make a blanket surrender if the entries in the loose papers could have been explained. According to the Ld. Commissioner of Income-tax (Appeals), there is no bona fide explanation for concealing the particulars of the income and, therefore, she confirmed the penalty levied by the 4 ITA No. 2931/Del/2014 AY: 2010-11 Assessing Officer. Aggrieved, the assessee in appeal before the Tribunal raising the grounds of appeal as reproduced above.
7. In the sole ground, the assessee is aggrieved against the confirming of penalty by the learned Commissioner of Income-tax (Appeals), which was levied by the Assessing Officer under section 271(1)(c) of the Act for furnishing inaccurate particulars of income.
8. Before us, the learned counsel of the assessee submitted that amount was surrendered during assessment proceedings to buy peace of mind and to avoid litigation or harassment and on the condition that no penalty would be levied and thus no penalty could be levied in such circumstances. In the support of the contention, the learned counsel relied on the decision of the Tribunal Amritsar bench in the case of Income Tax Officer Vs. Manjit Singh Baldev Singh Commission Agents reported in (1999) 69 ITD 97 (ASR). He further submitted that the assessee had already explained as why the amount in reference was not included while filing return of income and said explanation was bonafide, no penalty could have been levied by the Assessing Officer.
9. The learned Senior Departmental Representative, on the other hand, relied on the order of the lower authorities.
10. We have heard the rival submissions and perused the relevant material on record. Before us, the learned counsel of the assessee has placed reliance on the decision of the Tribunal in the case of ITO Vs. Manjit Singh Baldev Singh commission agents (supra). But we find that in that case the addition based on peak credit was surrendered by the assessee in the assessment proceedings only. But in the present case the assessee had already admitted and surrendered the amount of Rs.17,99,995/- appearing in loose papers impounded during the course of survey action, including the amount of Rs.13,83,775/- on which the Assessing Officer levied the penalty. In the case of present assessee, 5 ITA No. 2931/Del/2014 AY: 2010-11 thus, the addition in question was already detected by the Department. Thus in our view, the facts and circumstances of the instant case are different from the facts of the case cited by the learned counsel, and thus the ratio of the said decision cannot be applied over the facts of the instant case. In our view, mere raising of a plea of voluntary surrender or buy peace or avoid litigation or amicable settlement is not sufficient for not levy of penalty and the Assessing Officer is required to examine whether the assessee has discharged his burden of proving the bonafide.
11. We find that in the case of the assessee the Ld. Commissioner of Income-tax (Appeals) has confirmed the penalty on the ground that explanation furnished by the assessee was not bonafide, thus the Ld. Commissioner of Income-tax (Appeals) has invoked Explanation-1, of the section 271(1) of the Act. The Assessing Officer, however, has not recorded any finding whether the explanation filed by assessee was bonafide or not. In this regard, we would like to extract the relevant Explanation of section 271(1)(c) of the Act as under:
"Failure to furnish returns, comply with notices, concealment of income, etc.
271. (1) .................................................................................. Explanation 1.--Where in respect of any facts material to the computation of the total income of any person under this Act,-- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the 48[Principal Commissioner or] Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause 6 ITA No. 2931/Del/2014 AY: 2010-11
(c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed."
12. The above explanation thus has two limbs. First limb under clause- A cover situation where there is no explanation at all or the explanation is found to be false. The second limb under clause-B covers the situation where the explanation furnished by the assessee is found to be not bonafide and all material facts are not disclosed.
13. In view of the above Explanation-1, we find that it is not the case of the lower authorities that no explanation was filed by the assessee or the explanation furnished was found to be false, thus the case of the assessee is not falling under the part-A of the explanation. The Ld. Commissioner of Income-tax (Appeals) has only observed that explanation furnished with assessee was not bonafide and thus the case of assessee is falling under part B of the Explanation-1.
14. We find that in the submission before the Assessing Officer, the assessee submitted that while filing the return of income the said amount of Rs.13,83,775/- was not included due to debatable view of inclusion of margin of sales instead of total amount of sales included in the loose papers. The learned Commissioner of Income-tax (Appeals) has not given any reasoning as to why the said explanation was not bonafide. We also find that out of amount of Rs.17,99,955/- appearing in loose papers, the assessee already accepted Rs.4,16,220/- in the return of income filed.
15. Further we find that, in the course of survey action, the survey team found unexplained stock, unexplained cash, unexplained investment in furniture and fixture and unexplained investment in renovation of shop alongwith loose papers indicating sales. In the circumstances, where in the course of search or survey action evidences 7 ITA No. 2931/Del/2014 AY: 2010-11 in respect of source of income and application of income both are found, then addition could have been made either on source of income or application of income and it cannot be made both for source of income and application of income. In the present case, the Assessing Officer in the assessment order has nowhere observed that the assessee was having any source of investment in stock, cash etc other than the sales. In such circumstances, the apparent source of investment in stock, cash, furniture and fixture, renovation in shop etc. is the sales appearing in loose papers and the Assessing Officer should have allowed the telescoping of the income appearing in loose papers against the investment in stock, cash etc. It appears to us that the Assessing Officer has simply made addition for the amount offered by the assessee, without going into whether said addition could have been made in the hands of the assessee or not. It is the statutory duty of the Assessing Officer to assess the income in accordance with law only. We find that the Assessing Officer, even levied the penalty without any finding recorded in the order on the issue whether the explanation filed by the assessee was bonafide or not and whether all material facts related to the addition were disclosed by the assessee.
16. In our view, merely making addition by the Assessing Officer, which is accepted by the assessee, cannot make the assessee liable for the levy of penalty unless the conditions of Explanation-1 of section 271(1)(c) are satisfied. In view of discussion above, we feel it appropriate to restore the matter to the file of the Assessing Officer to examine the applicability of the conditions of Expanation-1 of the section 271(1)(c) of the Act and decide the issue of levy of penalty in accordance with law. Nevertheless to mention that the assessee shall be afforded sufficient opportunity of hearing. Accordingly, the ground of the appeal of the assessee is allowed for statistical purpose.
8 ITA No. 2931/Del/2014AY: 2010-11
17. In the result, appeal of the assessee is allowed for statistical purpose.
The decision is pronounced in the open court on 15th February, 2017.
Sd/- Sd/-
(S.K. YADAV) (O.P. KANT)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 15th February, 2017.
RK/-(D.T.D)
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi