Madras High Court
Shri S.Sathyanarayanan vs The Assistant Commissioner Of Income ... on 25 August, 2014
Bench: R.Sudhakar, G.M.Akbar Ali
In the High Court of Judicature at Madras Dated: 25.08.2014 Coram The Honourable Mr.JUSTICE R.SUDHAKAR and The Honourable Mr.JUSTICE G.M.AKBAR ALI Tax Case (Appeal) Nos.608 to 613 of 2013 & connected M.Ps. Shri S.Sathyanarayanan .... Appellant in the above T.C.(A)s Vs. The Assistant Commissioner of Income Tax, Central Circle - I (5), Income Tax Department, Main Building IV Floor, 121, M.G.Road, Nungambakkam, Chennai - 600 034. .... Respondent in the above T.C.(A)s APPEALs under Section 260A of the Income Tax Act against the order dated 18.03.2013 made in I.T.A.Nos.2293,2298,2294,2295,2299 and 2296/MDS/2012 on the file of the Income Tax Appellate Tribunal 'B' Bench, Chennai for the assessment years 2002-03, 2003-04, 2003-04, 2004-05, 2004-05 and 2005-06. For Appellant : Mr.S.Sridhar For Respondent: Mr.T.R.Senthil Kumar Standing Counsel for Income Tax ------ C O M M O N J U D G M E N T
(Delivered by R.SUDHAKAR,J.) The above Tax Case (Appeals) are filed by the assessee as against the order of the Income Tax Appellate Tribunal for the assessment years 2002-03, 2003-04, 2003-04, 2004-05, 2004-05 and 2005-06 raising the following substantial questions of law:
"1. Whether the Appellate Tribunal is correct in law in sustaining the levy of penalty under Section 271(1)(c) of the Act overlooking the distinction between the acceptability of the explanation offered for the additions made in the computation of taxable total income which formed part of the assessment orders passed by the respondent as against the reasonableness of such explanation in the penalty proceedings and further overlooking the explanation 1 below the Section 271(1)(c) of the Act?
2. Whether the Appellate Tribunal is correct in law in sustaining the levy of penalty under Section 271(1)(c) of the Act overlooking the binding precedents cited including the decisions of Supreme Court as well as this Hon'ble Court wherein the levy of penalty under similar circumstances was held to be not automatic?"
2. The brief facts are as follows:
In the course of search conducted under Section 132 of the Income Tax Act in the business premises and the residential premises of K.Sundararaj, father of the assessee on 21.09.2005, certain amount of cash, books of accounts and documents in respect of the assessee were seized. Hence, the Assessing Officer issued notices to the assessee under Section 153C of the Income Tax Act on various dates. In response to the same, the assessee filed his return of income disclosing certain income. The Assessing Officer scrutinized the assessment and in respect of each assessment year, the Assessing Officer made additions as undisclosed income and initiated penalty proceedings. The details of the various bank deposits, which according to the Assessing Officer remained unexplained, are as follows:
Assessment Year Additions on which penalty levied quantum of penalty levied 2002-03 unexplained investment in banks - Rs.3,00,000/-
Rs.83,807/-
2003-04 unexplained investment in banks - Rs.2,50,000/-
Rs.71,464/-
2003-04 unexplained investment in banks - Rs.11,00,000/-
Rs.3,30,000/-
2004-05 unexplained investment in banks - Rs.10,40,000/-
Rs.3,18,716/-
2004-05 unexplained investment in banks - Rs.2,00,000/-
Rs.60,000/-
2005-06 unexplained investment in banks - Rs.14,90,000/-
Rs.5,13,785/-
In one case, more particularly, for the assessment year 2003-04, after finalising the assessment proceedings notice to reopen the assessment was issued on 26.3.2008 to the assessee on the ground that in the previous year relevant to the impugned assessment year, the assessee had made cash deposit of Rs.11.00 lakhs in the Indian Overseas Bank, Santhome Branch. The Assessing Officer held that though the assessee had stated that he had received the amount from the entity, namely, S&S Foundations (P) Ltd., the cash book of the said entity did not show any such payment. This was the finding in respect of all the cash deposits referred to above. Hence, the Assessing Officer imposed penalty under Section 271(1)(c) of the Income Tax Act holding that there has been concealment of particulars of income and also furnishing of inaccurate particulars for such income. As against the said order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who upheld the order of the Assessing Officer.
3. As against the said order, the assessee preferred further appeal before the Income Tax Appellate Tribunal. The Tribunal, after following the decision of the Delhi High Court in ITA No.415/2012 dated 21.01.2013 titled as CIT v. MAK Data Ltd, observed that the assessee had not given any proper explanation with regard to the source of income and confirmed the penalty proceedings initiated by the Assessing Officer. Aggrieved by the said order, the assessee preferred the present Tax Case (Appeals) raising the above-mentioned substantial questions of law.
4. Learned counsel appearing for the assessee submits that the assessee had submitted his explanation with regard to the cash deposits by furnishing cash flow statements and the source for such cash deposits was from his father's business M/s.S&S Foundation P. Ltd. He further submits that the provisions in Explanation 1 to Section 271(1)(c) of the Income Tax Act will enure to the benefit of the assessee and the Tribunal has not considered the said provision. Hence, the order of the Tribunal may be set aside. He also submits that since the assessee had paid tax and had cooperated in the assessment proceedings, the penalty proceedings are liable to be dropped.
5. Per conta, learned standing counsel appearing for the Revenue submits that the assessee had not given any proper explanation showing the source of income with regard to the cash deposits. The assessee offered explanation stating that the source of income was from the business run by his father. But the cash book pertaining to his father's business did not reflect such cash deposits. Also, the Assessing Officer had imposed minimum penalty in all the above cases. Hence, the Tribunal is correct in confirming the penalty proceedings.
6. Heard learned counsel appearing for the assessee and the learned Standing Counsel appearing for the Revenue and perused the materials placed before this Court.
7. It is not in dispute that during the search proceedings, some documents and cash in respect of the assessee was seized from the residential premises and business premises of the assessee's father. It is also not in dispute that the assessee had admitted the undisclosed income at the time of search. A reading of the order of the Tribunal shows that the Tribunal, primarily, considered the case in respect of the assessment year 2003-04 and held as follows:
"11. We have heard both parties and perused assessment orders, penalty orders and CIT(A)'s order in both cases. After the order of the CIT(A) in I.T.A.No.2294/Mds/2012 deleting the penalty qua agricultural income (supra), the only issue which arises in the cases is as to whether the CIT(A) has rightly confirmed the penalties qua unexplained cash deposit of Rs.2.50 lakhs and unexplained cash deposit of Rs.11.00 lakhs. It is a trite preposition of law that assessment proceedings and penalty proceedings are altogether different and they do not stand on same footing. In the penalty proceedings, the concerned assessee can always justify his conduct leading to addition by tendering appropriate explanations which has to be examined independently. In both these cases, we find that in 'scrutiny' assessment as well as reassessment, the assessee himself suffered the additions of unexplained cash deposits of Rs.2.5 lakhs and Rs.11.00 lakhs respectively. It also transpires that they pertain to amount deposited in assessee's bank account in Indian Overseas Bank, Santhome Branch, Chennai. At the first instance, the assessment was finalized under section 143(3) r.w.s. 153C r.w.s.153A of the "Act" vide assessment order dated 31.12.2007. Thereafter, the Assessing Officer passed reassessment order (supra) dated 24.12.2008. It is evident that in assessments as well as in penalty proceedings, there is no explanation tendered by the assessee as the submissions on both occasions are that since he had cooperated in the assesments, the penalty notices are liable to be dropped. In our view and more so, in view of the latest decision of the Hon'ble Delhi High Court in ITA No.415/2012 dated 21.01.2013 titled as CIT v. MAK Data Ltd., holding as under:
".........The absence of any explanation is statutorily considered as amounting to concealment of income. In the absence of any explanation regarding the receipt of the money, which is in the exclusive knowledge of the assessee, an adverse inference is sought to be drawn against the assessee under the first part of clause (A) of the said Explanation. This appears to be somewhat in the lines of Section 106 of the Evidence Act, the principle behind which has been extended to the provisions of section 271(1)(c) of the Act."
We are constrained to observe that since the assessee has offered no justification at all, we hold that the CIT(A) has rightly confirmed the penalties under challenge. Therefore, we affirm the order of the CIT(A) in both cases."
8. The Tribunal placed reliance on the decision of the Delhi High Court in ITA No.415/2012 dated 21.01.2013 titled as CIT v. MAK Data Ltd, which was subsequently upheld by the Supreme Court in the decision reported in (2013) 38 Taxmann.com 448 (SC) (MAK Data (P) Ltd. V. Commissioner of Income-tax-II), wherein, the Supreme Court held as follows:
"7. The AO, in our view, shall not be carried away by the plea of the assessee like "voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement", etc. to explain away its conduct. The question is whether the assessee has offered an explanation for concealment of particulars of income or furnishing inaccurate particulars of income. 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 constitute the income and not otherwise."
9. In the above case, the Supreme Court observed that penalty proceedings were justified when there was no explanation offered by the assessee for concealment of particulars of income or furnishing inaccurate particulars of income. The Supreme Court also clearly held that the burden is then on the assessee to show otherwise, by cogent and reliable evidence.
10. In the present case, we find that the assessee had not offered any explanation either during the assessment proceedings or during the penalty proceedings regarding the unexplained cash deposits. The assessee had also not disclosed the said income in the return filed in response to the notice issued under Section 153C of the Income Tax Act. Also, the findings of the Authorities below make it clear that there was no proper explanation given by the assessee with regard to the undisclosed income and the assessee had not given any details as to how he would fall within Explanation 1 to Section 271(1)(c) of the Income Tax Act. Without any material, the assessee had merely stated that the source of income was from the business run by his father and the assessee will be no avail. It is seen from the order of the Tribunal that the assessee and his father are Directors of the entity, namely, S&S Foundations P. Ltd. Hence, the authorities were justified in rejecting such a plea; in any event, the penalty imposed is minimum that is required under Section 271(1)(c) of the Income Tax Act. We also find that in view of the detection made by the Assessing Officer during the search conducted in the business premises and residential premises of the father of the assessee, the offer of surrender of income was made. Hence, it cannot be said that the surrender of income was voluntary.
11. In the absence of any material, the contention of the assessee that Explanation (1) to Section 271(1)(c) of the Income Tax Act will come to play as there is some bona fide explanation with regard to the undisclosed income, could not be accepted, as the findings of the Authorities below clearly show that there was no proper explanation by the assessee showing that the transaction was bona fide. It is also to be noted that even after the search, the assessee had not disclosed the cash deposits in the return of income filed. In such view of the matter, we find no error in the order passed by the Tribunal.
12. Accordingly, we find no question of law much less any substantial question of law arises for consideration in the above Tax Case (Appeals).
13. Learned counsel appearing for the assessee submits that a show cause notice has been issued for initiating prosecution proceedings against the assessee. He further submits that since the assessee had paid the tax, the penalty proceedings may be dropped.
14. Considering the age of the assessee as well as his father and the fact that there has been some element of cooperation in the payment of tax, it is open to the Department to consider the claim of the assessee leniently.
15. The above Tax Case (Appeals) are disposed of accordingly. No costs. Consequently, connected M.P.s are closed.
Index :Yes/No (R.S.,J) (G.M.A.,J)
Internet:Yes/No 25.08.2014
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To
1. The Income Tax Appellate Tribunal 'B' Bench, Chennai
2. The Commissioner of Income Tax (Appeals) -II, Chennai - 34.
3. The Assistant Commissioner of Income Tax, Central Circle - I (5),
Chennai.
R.SUDHAKAR,J.
AND
G.M.AKBAR ALI,J.
sl
T.C.(A) Nos.608 to 613 of 2013
& connected M.Ps.
25.08.2014