Income Tax Appellate Tribunal - Ahmedabad
Madhuri Developers,, Baroda vs Department Of Income Tax on 14 March, 2005
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH AHMADABAD
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ 'डȣ
डȣ'
डȣ
Before Shri D.K.Tyagi, Judicial Member and
ौी डȣ.के.×यागी, Ûयाियक सदःय
Shri T.R. Meena, Accountant Member
ौी टȣ.आर.मीणा, लेखा सदःय के सम¢ ।
ITA Nos. 1509, 1510 & 1511/Ahd/2005
Assessm ent Years :1997-98, 98-99 & 99-
2000 resp.
The Income Tax Of ficer, V/s. M/s. Madhuri Developers
nd
W ard-2(2), 2 Floor, C/o. Hotel Panchsheel,
Aayakar Bhavan, Race 5-Sampatrao Colony,
Course Circle, Baroda R.C.Dutt Road, Baroda
P AN No. AAHFM 7684F
(Appellant) .. (Respondent)
राजःव कȧ ओर से Shri J. P. Jhangid, Sr. D.R.
By Revenue
आवेदक कȧ ओर से/By Assessee Shri M. K. Patel, A.R.
सुनवाई कȧ तारȣख/Date of Hearing
23.09.2013
घोषणा कȧ तारȣख/Date of Pronouncement 01.11.2013
ORDER
PER : Shri T.R.Meena, Accountant Member
These are three appeals at the behest of the Revenue which have emanated from the orders of CIT(A)-II, Baroda, dated 14th March, 2005 for all assessment years. The sole ground of appeal is against deleting the penalty of Rs.1,99,780/- in A.Y. 1997-98, Rs.8,48,859/- in A.Y. 1998-99 & Rs.7,15418/- in 1999-2000 u/s.271(1)(C) by the CIT(A)-II, Baroda.
2. The A.O. observed as under:
I T A No s . 1 50 9- 151 1/ A hd / 05 , A. Y s . 1 99 7- 98 , 9 8- 99 & 9 9- 00 . Page 2 "In this case, the return of income was filed on 31.03.1999 declaring total income at Rs.2,10,304/-. Scrutiny assessment was finalized on 31.03.2000 and total income was assessed at Rs.6,09,850/- by disallowing of Rs.3,99,555/- claimed as land development expenses by the assessee. The ld. CIT(A) dismissed the appeal of the assessee against this order vide appeal No.CAB/III-129/2000-01 dated 08.12.2000.
The assessment was reopened on the basis of information received from the then CIT, Baroda, that the assessee has made VDIS declaration for Rs.68,58,000/- for the A.Y. 1997-98 showing net profit as per the P&L A/c. The assessee has failed to pay due taxes and therefore lost the immunity granted under VDIS 1997. On the basis of directions contained in this letter to reopen the assessment the case was reopened and order u/s.143(3) r.w.s. 147 was passed on 07.03.2003 and total income was assessed at Rs.68,58,000/-. Out of this assessed income Rs.62,48,150/- was added on protective basis and Rs.6,09,850/- was assessed on substantive basis. The income assessed on protective basis was assessed substantively in the assessee's case for A.Y. 1998-99 and 1999-2000.
The assessee again went to the appeal and ld. CIT(A) vide his order No.CAB/VI-256/03-04 dated 09.02.2004 deleted the addition made on protective basis and income assessed on substantive basis was confirmed. The protective addition was deleted as the ld.CIT(A) dismissed the appeal of the assessee and substantive assessment of the above referred income in A.Y.1998-99 and 1999-2000 were confirmed. In other words the findings of the Assessing Officer that the income of Rs.68,58,000/- is to be assessed in three years i.e. A.Y. 1997-98, 1998-99 and 1999-2000 was confirmed by the ld. CIT(A).
I T A No s . 1 50 9- 151 1/ A hd / 05 , A. Y s . 1 99 7- 98 , 9 8- 99 & 9 9- 00 . Page 3
The penalty proceeding u/s. 271(1)(c) was initiated on the addition made in all the three years for concealing the income and furnishing inaccurate particulars of income. The brief facts of the case are as under:
"The assesses declared Rs.68,58,000/- under VD1S 1997 as income for A.Y.1997-98 on sale of land but the assessee failed to pay due taxes and after that assessee filed returns of income for A.Y.1997-98,1998-99 and 1999-2000 and profit earned on that land deal was offered for taxation in these years. The returned income of these years are as under :
A.Y.1997-98 - Rs.2,10,304/-
A.Y.1998-99 - Rs.12,31,220/-
A.Y.1999-2000 - Rs.12,06,220/-
At the same time the assesses claimed land development expenses in this three years which are as under :
A.Y.1997-98 - Rs.3,99,555/-
A.Y.1998-99 - Rs.19,40,248/-
A.Y.1999-2000 - Rs.16,35,241/-
These land development expenses is the difference which has escaped assessment if income is considered as per VDIS declaration. The details of these expenses were called for at the time of scrutiny assessment and assesses shown inability to furnish any vouchers, bills, etc., in support of his claim for these land development expenses. It was submitted by the assessee at that time out of Rs.39,75,044/- Rs.18,00,000/- were paid to various authorities for obtaining ULC permission and clearing of land from litigation, etc. For remaining expenses it was submitted by the assessee that these expenses are incurred as Misc. expenses and I T A No s . 1 50 9- 151 1/ A hd / 05 , A. Y s . 1 99 7- 98 , 9 8- 99 & 9 9- 00 . Page 4 for payment to Shri S K Pathan and his family. As the assessee has failed to submit any vouchers, bills, etc., any evidence in support of his claim of expenses and the fact that certain amount has been utilized for illegal payment which are not allowable as per explanation 1 of Section 37(1) of the IT Act, therefore, the same were disallowed at the time of assessment. The assessee has failed to submit any evidences during the course of appellate proceedings also. Now, at the time of penalty proceedings also. The assessee has not submitted any details of these expenses.
The onus of proving the genuineness of expenses by putting forth required evidences is solely rest with the assessee. Assessed not only failed to discharge the onus caste upon it did it with the intention of doing it."
The A.O. gave reasonable opportunity of being heard before imposing penalty u/s. 271(1)(c) in all the years, which was considered by the A.O. and he has held that the assessee has furnished inaccurate particulars of expenses claimed of Rs.39,75,044/- without any documentary evidence. The assessee's contention was that Rs.18 lacs had been paid to various ULC authority illegal expenditure not allowed under Explanation 1 of Section 37(1) of the IT Act. The assessee was aware that these expenses are not liable even then he had claimed the expenses without any supporting evidence. The ld. A.O. relied upon in case of B.A. Balasubramaniyam Bros. & Co. vs. CIT 1999 (236) ITR 997 SC, wherein it was held that there is difference between the returned and assessed income there is inference of conealment as a rule of law. The responsibilities for rebutting such inference is squarely on the assessee. In absence of any explanation by itself will merit penalty.
I T A No s . 1 50 9- 151 1/ A hd / 05 , A. Y s . 1 99 7- 98 , 9 8- 99 & 9 9- 00 . Page 5
The assessee did not have any supporting evidence for claiming of those expenses. Therefore, on verification of explanation offered was found false. He further relied in case of K. P. Madhusudanan vs. CiT 251 ITR 1991 (SC), Sir Sahadilal Sugar and General Mills Ltd. 168 ITR 705 (SC), CIT vs. Anwar Ali 76 ITR 696 (SC). It was observed that 'deliberately' word in Explanation 1 below Section 271(1) was omitted by the Finance Act, w.e.f. 01.04.1964 added with effect from the same date providing for deemed concealment in case the returned income was less than 80% of the assessed income thus shifting the burden on the assessee to prove that there was no concealment in such cases. He further relied on following cases:
i. CIT Vs Musadilal Ram Bharose 165 ITR 14, 20 (SC) ii. CIT Vs K R Sadyappan 185 ITR 49 (SC) iii. CIT (Addl) Vs Jeevan Lal Shah 205 ITR 244 (SC) iv. B A Balasubramaniam & Bros. Co., Vs CIT 236 ITR 977, 978 (SC) v. K P Madhusudanan Vs CIT 251 ITR 99 (SC).
Since the assessee had failed to substantiate its explanation in regard to books of account being correct and complete and held failed through its bonafide and had also failed to prove that all material facts were disclosed.
He imposed penalty @ 125% of tax sough to be evaded at Rs.1,99,780/- for A.Y. 1997-98, Rs.8,48,859/- for A.Y. 1998-99 & Rs.7,15418/- for 1999-2000.
3. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A) who had deleted the penalty by observing as under:
I T A No s . 1 50 9- 151 1/ A hd / 05 , A. Y s . 1 99 7- 98 , 9 8- 99 & 9 9- 00 . Page 6 "3.43 Relying on the legal pronouncements and considering the fact of the appellant's case, I hold that there is no justification to impose penalty inferring that appellant had concealed income or filed inaccurate particulars of income invoking Explanation-1 and more particularly when -
(i) The appellant has filed returns voluntarily showing profit from sale of land after claiming expenses and at all stage of assessment and re-assessment has furnished the explanation for claim of land development expenses and other expenses.
(ii) The addition made based on information received to re-
open the assessment for Asst. Year 97-98 has been deleted and income of original assessment is directed to be taxed by CIT(A) since there is no change in assessed income for Asst Year 1997-98 as per original proceedings and as per reassessment proceedings after giving effect to CIT(A)'s order. The CIT(A) in Asst Year 1997-98 vide order No. /VI-256/03-04 dated 9.2.2004, in para 3 deleting the protective addition made of Rs.62,48,150, has held that the original income assessed vide order dated 31.3.2000 will remain unchanged.
(iii) The quantum appeals have been decided by the CIT(A) Baroda wherein disallowance of claim has been upheld on the finding that such claim was not allowable u/s.37 as well as liability of incurring such expenses was not of appellant. The expenses incurred were prior to insertion of Explanation to section 37 on the assessee while the onus to disprove what is climed by the assessee is on the Revenue and merely by rejecting the assessee's explanation and without discharging the I T A No s . 1 50 9- 151 1/ A hd / 05 , A. Y s . 1 99 7- 98 , 9 8- 99 & 9 9- 00 . Page 7 onus of the Revenue, penalty cannot be levied or sustained. In the case of CIT Vs Ved Prakash (2004) 141 Taxman 377 (P & H) has observed that once entire amount stood assessed, there was no scope for issue of a fresh notice u/s 148 to assess the same income once again. Penalty proceedings during the course of subsequent reassessment proceedings could only be initiated if the AO had discovered any undisclosed income over and above the income which had already been assessed in original assessment proceedings. The levy of penalty under section 271(1)(c) has been cancelled."
5. Now the Revenue is before us. Ld. Sr. D.R. vehemently relied that assessee made VDIS but no tax had been paid by the assessee. Therefore, this information was forwarded by the CIT to the A.O. to assess the income for respective years as per law. The assessee had sold land and claiming various illegal expenses without any evidence in the guise of development expenses to the tune of Rs.42,59,531/- in all three years. The assessee has recovered Rs.2,96,996/- from M/s. Bhagyalaxmi Corporation and assessee claimed net total expenses of Rs.39,53,004/- the bifurcation of expenses is as under:
A.Y. Amount
1997-98 Rs. 3,99,555/-
1998-99 Rs.19,40,248/-
1999-00 Rs.16,35,241/-
The assessee admitted before the lower authorities that as illegal expenses claimed by the appellant which was not allowable for Explanation-1 to Section I T A No s . 1 50 9- 151 1/ A hd / 05 , A. Y s . 1 99 7- 98 , 9 8- 99 & 9 9- 00 . Page 8 37(1) of the IT Act. Further, there is no other evidences were produced that these expenses were incurred wholly and exclusively for the purpose of business. The Hon'ble ITAT had confirmed the addition in A.Y. 97-98, land expenses are paid to the Government authority for getting clearance from and even assessee could not produce any detail in regard to these expenses. The A.O. had rightly invoked Explanation 1 to Section 37(1) of the Act being illegal expenditure but same cannot be allowed. The lower authorities have rightly disallowed this expenditure and they confirmed the same in ITA No.48/Ahd/2005 for A.Y. 1997-98. The appellant also filed the appeal against the bifurcation of income in ITA Nos. 1305, 1306 & 1307/Ahd/2011 for A.Ys. 97-98, 98-99 & 99-00, which was dismissed by the Co-ordinate 'D' Bench, Ahmedabad, vide order dated 26.06.2009. Therefore, he prayed to confirm penalty in all three years. At the outset, ld. Counsel argued that these expenses were incurred expenditure to the tune of Rs.39.53 lacs which was related to year 1994. There was a search in place of at the residence premises of Kishorebhai on 16.12.1995 as per Annexure A to page 3 & 4. The land sale transaction Mujmahuda land was recorded on which statement of Shri Kishorebhai Parikh was recorded u/s. 131 on 20.11.1995. He has drawn our attention on page no.7 of paper book. He also has drawn our attention on page nos. 17 & 18 wherein it was submitted before the CIT(A) which are the copies of the order of CIT(A) for A.Y. 97-98 and argued that there was a dispute between the land owner and assessee and without incurring this expenditure, this transaction can not be materialized. He further I T A No s . 1 50 9- 151 1/ A hd / 05 , A. Y s . 1 99 7- 98 , 9 8- 99 & 9 9- 00 . Page 9 has drawn our attention on page nos. 85, 88, 90 & 91 and argued that the statement of Shri Kishanlal M. Parikeh recorded u/s. 131 of the IT Act on 20.11.1995 and all the details of cash as well as cheques payments had been mentioned in statement and it is admitted that Rs.18 lacs were incurred in the name of Gandihnagar expenses. Rs.14 lacs cash was given to land owners and other brothers and Rs.7 lacs to Thakkar brothers for settlement against the sale of Mujmahuda for sale consideration of Rs.90 lacs. The assessee had paid Rs. 47.5 lacs to Pathan family out of Rs.90 lacs. The ld. Counsel argued that these are expenses incurred in business expediency. Therefore, penalty imposes u/s. 271(1)(c) may be deleted. Alternatively he has also argued that penalty imposed @ 125% should be restricted to 100%. In rejoinder, ld. Sr. D.R. again objected on the ground that expenses were incurred in the year 1994 it should be claimed on the basis of mercantile system of accounting in the relevant year not the year under consideration. The ld. Counsel further relied in case of Rajmal Lakhichand vs. ACIT, ITAT 'B' Bench, Pune, [2013] 32 taxmann.com 248 (Pune - Trib.), wherein certain silver was confiscated by Custom Officers and was allowed as business loss in the relevant assessment year. Whereas, ld. Sr. D.R. requested to consider the written reply submitted by him vide letter dated 22.02.2013, wherein it was summarized by the Sr. D.R. that :
"i. Assessed had made a claim for deduction of development expenses.
ii. The assessee was not able to substantiate the genuineness or adminissibility of these expenses.
I T A No s . 1 50 9- 151 1/ A hd / 05 ,
A. Y s . 1 99 7- 98 , 9 8- 99 & 9 9- 00 . Page 10
iii. On the contrary AO found from assessee's explanation that these
expenses were not admissible by virtue of explanation to Section 37(1).
(iv) The disallowance was confirmed by CIT(A) as well as by Hon'ble ITAT.
(v) AO called for explanation from assessee against levy of penalty u/s.271(1)(c).
(vi) Assessed filed explanation but was
(a) Not ablve to substantiate it.
(b) Not able to prove it bonafide.
(c) From the record it cannot be said that assessee had
disclosed all the facts relating to his explanation and material to computation of his total income (Details of payment made of development charges were infact with held by assessee).
(vii) AO imposed penalty u/s.271(1)(c) and explanation 1 thereto
(viii) Ld. CIT(A) deleted the penalty on the basis of incorrect and irrelevant facts an observations, despite the fact that presumption raised against assessee by clause (A) & (B) of Explanation 1 to section 271(1)(c) was not rebutted by assessee by virtue of his failure as mentioned in (a) (b) &
(c) in (6) above."
He further relied in ITAT 'A' Bench, Pune decision in Kanbay Software India (P.) Ltd. vs. DCIT [2009] 31 SOT 153 (Pune), wherein it was held that whether judgment in the Union of India vs. Dharmendra Textile LProcessors [2008] 306 ITR 277, does not make a radical change in Scheme of Section 271(1)(c) but it re-emphasizes paradigm shift on burden of proof as brought about by Explanation to Section 271(1)(c) - Held, yes. Thus, he prayed to confirm the penalty.
I T A No s . 1 50 9- 151 1/ A hd / 05 , A. Y s . 1 99 7- 98 , 9 8- 99 & 9 9- 00 . Page 11
6. We have heard the rival contentions and perused the material on record. Shri Gopal G. Pairkh interrogated u/s. 131 on 20.11.1995 and who is the partner of M/s. Madhuri Developers and admitted this transaction unrecorded. He also offered for taxation Rs.28 lacs as unaccounted own money taken in various land transaction. Even he did not disclose after admission of additional income before the A.O. in regular return which was relevant to A.Y. 96-97 but filed VDIS before the Commissioner, which was rejected on the basis of not paying tax. The assessee filed regular return on 31.03.1999 for A.Y. 97-98, 31.03.2000 for 98-99 & 31.03.2001 for A.Y 99-00 and claimed these expenses against the income without any supporting evidence before the A.O., which was rejected and disallowed by the A.O. and found inadmissible expenditure illegal as per Explanation 1 to Section 37(1) of the IT Act, which has been confirmed by the Co-ordinate Bench. The ld. CIT(A)'s findings were not found justified that this profit from the sale of land is voluntary, ITAT has reversed the order of the CIT(A). The assessee did not discharge its onus to substantiate his claim bonafide. The A.O. accepted the income and also disallowed the expenses as per Section 37, which was claimed by the appellant illegally as well as without support of evidence. Recently, Hon'ble Madras High Court in case of Sharma Alloys (India) Ltd. vs. ITO (OSD) [2013] 357 ITR 379 (Mad), held as under:
"The decision of the apex court in the case of Union of India vs. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) which is referred to by the Income-tax Appellate Tribunal and the subsequent decision in the Union of India v. Rajasthan Spg. And Wvg. Mills I T A No s . 1 50 9- 151 1/ A hd / 05 , A. Y s . 1 99 7- 98 , 9 8- 99 & 9 9- 00 . Page 12 reported in [2009] 180 Taxman 609 (SC); [2010] 1 GSTR 66 9SC) clearly point out that the penalty is leviable for deliberate deception of the claim. Thus, the levy of penalty would depend on the existence or otherwise of the conditions calling for levy of penalty. The object behind the enactment of section 271(1)(c), read with the Explanations, indicates that the section has been enacted to provide for a remedy for loss of revenue, by reason of concealment of particulars of income. Thus, being a civil liability and that the explanation offered by the assessee not being a bonafide one, particularly on the facts of the case, we have no hesitation in confirming he order of the Income-tax Appellate Tribunal."
Thus, the assessee filed inaccurate particulars of income and concealed income. Therefore, we reverse the order of the CIT(A). However, the penalty imposed @ 125% which is reduced to 100% of tax sought to be evaded. Therefore, A.O. is directed to re-calculate the penalty @ 100%.
7. In the result, the Revenue's appeals in all three years are partly allowed.
These Orders pronounced in open Court on 01.11.2013 Sd/- Sd/-
(D.K.Tyagi) (T.R. Meena)
Judicial Member Accountant Member
True Copy
S.K.Sinha
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. राजःव / Revenue
2. आवेदक / Assessee
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार