Income Tax Appellate Tribunal - Jaipur
Ito, Jaipur vs Gajanan Towers Pvt. Ltd., Jaipur on 12 March, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 751/JP/2013
fu/kZkj.k o"kZ@Assessment Years : 2005-06.
The Income Tax Officer, cuke M/s. Gajanan Towers Pvt. Ltd.,
Ward 4(1), Vs. Jaipur.
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AACCK 0420 F
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl. CIT)
fu/kZkfjrh dh vksj ls@Assessee by : Shri S.L. Poddar &
Ms. Isha Kanungo (Advocates )
lquokbZ dh rkjh[k@ Date of Hearing : 03.01.2018
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 12/03/2018.
vkns'k@ ORDER
PER VIJAY PAL RAO, J.M.
This appeal by the revenue is directed against the order dated 31st July, 2013 of ld. CIT (A)-II, Jaipur arising from the penalty order passed under section 271(1)(c) of the Act, 1961 for the assessment year 2005-06. The revenue has raised the following grounds of appeal :-
(i) Whether on the facts and in the circumstances of the case and in law the ld. CIT (Appeals) has erred in deleting and restricting the penalty imposed u/s 271(1)(c) by the AO, without appreciating the fact that the assessee deliberately attempted to conceal its income by filing inaccurate particulars of income.2 ITA No. 751/JP/2013
M/s. Gajanan Towers Pvt. Ltd.
(ii) The appellant craves its rights to add, amend or alter any of grounds on or before the hearing.
2. The assessee has filed its return of income on 31st October, 2005 declaring loss of Rs. 46,95,261/-. Thereafter the assessee revised its return of income on 8th February, 2006 and declared loss of Rs. 22,58,484/-. Thereafter, a survey under section 133A of the IT Act was conducted at the business premises of the assessee on 10th March, 2006 wherein various discrepancies were found. After the survey the assessee again revised its return of income on 28th March, 2006 declaring profit of Rs. 23,41,516/-. The assessment under section 143(3) was completed on 28.12.2007 on the total income of Rs. 42,26,934/-. The matter was carried upto the stage of Tribunal in quantum proceedings against the additions/disallowances made by the AO. The additions/disallowances confirmed by this Tribunal are as under :-
Undeclared sales Rs. 5,04,985/-
Disallowance u/s 40(a)(ia) Rs. 7,26,512/-
Disallowance of expenditure
Being not incidental to the
Business. Rs. 37,827/-
Addition u/s 69 being
Unexplained expenditure Rs.3,15,750/-
Apart from the above additions/disallowances, there was an addition on account of undisclosed cash receipt of Rs. 46,00,000/- which was declared by the assessee in the revised return filed after the survey proceedings. The AO initiated proceedings for levy of penalty under section 271(1)(c) of the Act in respect of the above 3 ITA No. 751/JP/2013 M/s. Gajanan Towers Pvt. Ltd.
additions/disallowances as well as in respect of the disallowance under section 24(a) in pursuant to the revision order passed under section 263 of Rs. 1,92,000/-. Thus the total amount on which penalty was initiated was Rs. 63,77,074/-. The AO levied a penalty of Rs. 46,67,060/- which is 200% of tax evaded on the said amount vide order dated 30th March, 2012 passed under section 271(1)(c) of the Act. The assessee challenged the action of the AO before ld. CIT (A). The ld. CIT (A) has deleted the penalty levied against the undisclosed income of Rs. 46,00,000/-, disallowance made under section 40(a)(ia) and the addition/disallowance made under section 24(a) of Rs. 1,92,000/-. The ld. CIT (A) has though confirmed the levy of penalty, however, to the extent of 100% as against the 200% levied by the AO in respect of undisclosed sales of Rs. 5,04,985/- and the addition made under section 69C of Rs. 3,15,750/-. Thus the revenue has challenged the impugned order of ld. CIT (A) in respect of the relief granted either by deleting the penalty or reducing to 100% from 200%.
3. Before us the ld. D/R has contended that as regards the penalty levied against the undisclosed income on account of unexplained deposit made of Rs. 46,00,000/- in the revised return of income, it was not a voluntary disclosure by the assessee but the assessee has disclosed this amount only after a survey was conducted and the assessee has declared the undisclosed income during the course of survey. Thus he has submitted that the ld. CIT (A) has committed an error by treating the disclosure in the revised return as voluntary disclosure and not concealment of income. In support of his contention, the ld. D/R has relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Usha International Ltd. 212 taxman 519 /254 CTR 509 (Delhi) as well as decision of Hon'ble Jurisdictional 4 ITA No. 751/JP/2013 M/s. Gajanan Towers Pvt. Ltd.
High Court in the case of Grass Field Farms Resorts Pvt. Ltd. vs. DCIT, 388 ITR 395 (Raj.) and submitted that the disclosure made by the assessee in the revised return only because of the material and documents found during the survey and statement was recorded. Therefore, the same cannot be held as voluntary. The ld. D/R has also relied upon the decision of Hon'ble Supreme Court in the case of Mak Data Pvt. Ltd. vs. CIT, 358 ITR 593 (SC) and submitted that Hon'ble Supreme Court has held that surrender of income is not voluntary in the sense that the offer of surrender was made in view detection made by the AO in the search conducted in the sister concern of the assessee. Thus the ld. D/R has submitted that it is clearly a case of concealment of income and the assessee disclosed the said income of Rs. 46,00,000/- only because of survey action taken by the AO. He has relied upon the order of the A.O. 3.1. As regards the other addition on which the penalty was deleted or reduced by the ld. CIT (A), the ld. D/R has relied upon the order of the AO. 3.2. On the other hand, the ld. A/R of the assessee has submitted that the return of income was filed within the period of limitation permissible under section 139 of the Act and, therefore, the same cannot be considered as undisclosed income of the assessee when there is no addition made by the AO in the return of income. When a valid revised return of income was filed and accepted by the AO then the amount offered to tax in the return of income cannot be held as concealed income. Further, the ld. A/R has submitted that even otherwise this was not a real income of the assessee but only advances were received by the assessee without any actual sale during the year under consideration. The income would arise or accrued only at the time of sale in the subsequent year. Hence the mere surrender of income by the 5 ITA No. 751/JP/2013 M/s. Gajanan Towers Pvt. Ltd.
assessee in the revised return of income cannot be treated as undisclosed income of the assessee. He has relied upon the decision of Hon'ble Karnataka High Court in the case of CIT vs. Vega Auto Accessories Pvt. Ltd., 212 taxman 96 (Kar.). He has also supported the order of ld. CIT (A). The ld. A/R has also relied upon the various decisions which were relied upon before ld. CIT (A).
4. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the assessee has offered income of Rs. 46,00,000/- in its revised return of income filed on 28th March, 2006. The said revised return was though within the period of limitation, however, the facts and circumstances at the time of surrender cannot be ignored which led to the disclosure of said income of Rs. 46,00,000/- by the assessee in the revised return. It is pertinent to note that this is the third return filed by the assessee and prior to this the assessee already filed two returns of income. It is also not in dispute that revised return filed on 28th March, 2006 is post survey action on 10th March, 2006. But for the survey proceedings the assessee could not have declared this amount of Rs. 46,00,000/- as this amount was found to have been received by the assessee from the buyers of the flats. The Director of the assessee company has admitted this fact that the assessee received this amount from the buyers of the flats. However, the assessee has contended that since it was received as an advance and the actual sale was not completed during the year under consideration. However, when the assessee has finally declared this income and offered to tax in the return of income, then the issue whether this income was accrued during the year could not be examined by the AO. The question arises whether this income disclosed by the assessee and offered to tax in the revised return of income filed after the survey action is a voluntary 6 ITA No. 751/JP/2013 M/s. Gajanan Towers Pvt. Ltd.
disclosure or because of detection made by the AO during the course of survey. The Hon'ble Delhi High Court in the case of CIT vs. Usha International Ltd. (supra) while dealing with an issue of disclosure of income in the revised return after the survey has observed and held in para 20-22 as under :-
"20. In the judgment by a Division Bench of this Court in CIT v. SAS. Pharmaceuticals [2011] 335 ITR 259/199 Taxman 255/11 taxmann.com 207 the factual position was different. A survey was carried out at the business premises and godown of the assessee on 06.01.2003 during which certain discrepancies in cash, stock and renovation details were found. The assessee surrendered an amount of Rs. 88.14 lakhs during the survey on account of the discrepancies. However, at the time of the survey, the assessee was not under any obligation to file the return of income for the year ended 31.03.2003 as he still had time to do so. In the return filed for the assessment year 2003-04, relevant to the year ended on 31.03.2003, the assessee included the surrendered amount and filed a return of income declaring Rs. 87.71 lakhs. The assessment was made including the surrendered amount obviously on the basis of return filed. Penalty proceedings for concealment of income were initiated on the ground that the surrender was made during the survey only when the discrepancies were brought to the notice of the assessee. The assessing officer was of the view that had there been no survey the assessee would have succeeded in concealing the income and evading tax. The CIT (Appeals) and the Tribunal held that it was not a case of concealment of income as the surrendered income had been included in the return filed by the assessee. This Court upheld the finding of the Tribunal holding that there could not be any penalty on the basis of assumptions, surmises and conjectures and since the assessee had included the surrendered income in the return filed, there was no non-disclosure or concealment which could be penalised. This decision is not a case of revised return. It, therefore, does not have any relevance to the present case.
21. Both the CIT (Appeals) and the Tribunal, with respect, have not examined the facts of the present case in the manner expected of them. The Tribunal has merely based its conclusion on certain previous orders without any discussion of the facts of the present case. The question of concealment of income and whether the revised return was filed voluntarily or not is a question of fact to be examined and decided upon the facts and circumstances of the each case and, therefore, it was not permissible to the Tribunal to merely rely on earlier orders where this issue was considered and penalties were cancelled. It may be that in those cases also similar claims for deduction were involved; nevertheless, the question of concealment and the relevance of filing a revised return withdrawing the claim for deduction are all fact - dependent, and merely because in one case it was held that there was no concealment, it does not follow, as a matter of law, that in all such cases penalty cannot be imposed. At best, those earlier cases could only have a persuasive value. We 7 ITA No. 751/JP/2013 M/s. Gajanan Towers Pvt. Ltd.
are of the view that the Tribunal has committed an error in upholding the order of the CIT (Appeals) cancelling the penalties, without assigning any valid reason and without examining the facts.
22. For the above reasons we reverse the order of the Tribunal and hold that the penalty under Section 271(1)(c) was rightly imposed; the substantial question of law is answered in the negative, in favour of the Revenue and against the assessee. The penalty order passed by the assessing officer on 22.03.1993 is restored and the appeal filed by the Revenue is allowed. The assessee shall pay the costs of the revenue, which we assess at Rs. 20,000/-."
Thus the Hon'ble High Court has upheld the order of the AO levying the penalty wherein it was held that if there is no survey the assessee would have succeeded in concealing the income and evading the tax. Similar view has been taken by the Hon'ble Jurisdictional High Court in the case of Grass Field Farms & Resorts Pvt. Ltd. vs. DCIT (supra) in para 17 to 26. The Hon'ble High Court has considered the judgment of the Hon'ble Supreme Court in the case of Mak Data Pvt. Ltd. vs. CIT (supra) and upheld the levy of penalty in respect of the amount disclosed by the assessee after the survey conducted by the AO. The Hon'ble Supreme Court in the case of Mak Data Pvt. Ltd. vs. CIT (supra) has laid down the law on this point in para 9 to 11 as under :-
"9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the 8 ITA No. 751/JP/2013 M/s. Gajanan Towers Pvt. Ltd.
assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961.
10. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing. The scope of Section 271(l)(c) has also been elaborately discussed by this Court in Union of India v. Dharmendra Textile Processors [2008] 13 SCC 369 and CIT v. Atul Mohan Bindal [2009] 9 SCC 589.
11. The principle laid down by this Court, in our view, has been correctly followed by the Revenue and we find no illegality in the department initiating penalty proceedings in the instant case. We, therefore, fully agree with the view of the High Court. Hence, the appeal lacks merit and is dismissed. There shall be no order as to costs."
Thus in view of the facts and circumstances of the case, we note that the assessee disclosed the income of Rs. 46,00,000/- only after the survey proceedings and in view of the binding precedents, we up hold the levy of penalty and reversed the order of ld. CIT (A) qua this issue in respect of the income disclosed by the assessee.
5. As regards the penalty in respect of undisclosed sales, the ld. CIT (A) has restricted the levy of penalty from 200% to 100%.
6. We have heard the ld. D/R as well as the ld. A/R and considered the relevant material on record. Though the addition made by the AO was sustained by this Tribunal and the same has attained the finality, however, we find that the penalty equivalent to 100% of tax to be evaded on this amount is a reasonable and proper decision taken by the ld. CIT (A) which does not require any interference. Accordingly, we uphold the finding of the ld. CIT (A) qua this issue. 9 ITA No. 751/JP/2013
M/s. Gajanan Towers Pvt. Ltd.
7. As regards the penalty in respect of disallowance made under section 40(a)(ia), the ld. CIT (A) has deleted the penalty.
8. We have heard the ld. D/R as well as the ld. A/R and considered the relevant material on record. The AO has levied the penalty in respect of the disallowance made under section 40(a)(ia) because of non compliance of provisions of deduction of TDS. It is not the case of the AO that the expenditure claimed by the assessee is bogus or not allowable under sections 28 to 37 of the IT Act. However, the disallowance was made only because of non deduction of TDS by the assessee. The remedy against the loss of revenue in such violation of provisions of deduction of tax is two-fold. One is an order to be passed under section 201(1)/201(1A) and another remedy to make the compliance is disallowance of the said expenditure under section 40(a)(ia). Therefore, when the claim of expenditure other-wise not found to be bogus or patently impermissible the disallowance made by the AO by invoking the provisions of section 40(a)(ia) would not lead to conclusion that the assessee has either concealed the particulars of income or furnished inaccurate particulars of income. Once the case of disallowance under section 40(a)(ia) does not fall under the category of concealment of particulars of income or inaccurate particulars of income, the mere disallowance because of non compliance of the provisions of the Act ipso facto would not lead to levy of penalty. Hence, we do not find any error or illegality in the order of the ld. CIT (A) in deleting the penalty in respect of disallowance made under section 40(a)(ia).
9. The penalty against the addition made under section 69C was restricted to 100% by ld. CIT (A).
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10. We have heard the ld. D/R as well as the ld. A/R and considered the relevant material on record. The addition made by the AO under section 69C though was confirmed and attained the finality, however, this addition was due to the reason that the assessee failed to explain the source of said expenses. Accordingly, we concur with the view of ld. CIT (A) to restrict the penalty to 100% of the tax to be evaded of such income. The order of ld. CIT (A) is upheld.
11. Penalty on the addition/disallowance made under section 24(a) in pursuant to the revision order under section 263.
12. The ld. CIT (A) has considered this issue inpara 6 at pages 20 & 21 of the order as under :-
" 6. Penalty on addition under section 263 of Rs. 1,92,000 - assessing officer levied penalty on addition relating to income from rent of property treated as business income. Appellant submitted that this issue is decided in its favour by ITAT in the appellant's own case for assessment year 2006-07. I have go through the order of ITAT dated 9.07.2010 and it is seen that in para 10, the income from rent was considered as income from the property. Since this issue is already decided in the appellant's favour in subsequent year by ITAT, penalty on such addition cannot be levied. Accordingly penalty of this addition is deleted."
Thus it is clear that the said addition was deleted by the Tribunal in the appeal filed by the assessee against the revision order. This fact of deletion of the addition has not been disputed by the revenue. Accordingly when the Tribunal has already deleted the addition, then the penalty under section 271(1)(c) has no leg to stand. 11 ITA No. 751/JP/2013
M/s. Gajanan Towers Pvt. Ltd.
Accordingly, we do not find any error or illegality in the order of the ld. CIT (A) qua this issue.
13. In the result, appeal of the revenue is partly allowed.
Order pronounced in the open court on 12/03/2018.
Sd/- Sd/-
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(VIKRAM SINGH YADAV ) ( VIJAY PAL RAO )
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated: 12/03/2018.
das/
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The ITO Ward 4(1), Jaipur.
2. izR;FkhZ@ The Respondent-M/s. Gajanan Towers Pvt. Ltd., Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File {ITA No. 751/JP/2013} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 12 ITA No. 751/JP/2013 M/s. Gajanan Towers Pvt. Ltd.