Income Tax Appellate Tribunal - Chandigarh
Subhash Chander , Ellenabad vs Assessee on 23 September, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'B', CHANDIGARH
BEFORE SHR I T.R.SOOD, ACCOUNTANT MEMBER
AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER
ITA Nos.784 to 786/Chd/2013
Assessment Years : 1997-98 to 1999-2000
Subhash Chander Vs. The Income Tax Officer,
Prop.M/s Dhram Chand Ward 2,
Anand Kumar, Ellenabad. Sirsa.
PAN: ABUPC2779B
(Appellant) (Respondent)
Appellant by : S h r i D . K . G o ya l
Respondent by : Shri J.S.Nagar, DR
Date of hearing : 23.09.2013
Date of Pronouncement : 30.09.2013
O R D E R
Per SUSHMA CHOWLA, J.M. :
These three appeals filed by the assessee are against the consolidated order of the Commissioner of Income Tax (Appeals), R o h t a k d a t e d 4 . 4 . 2 0 1 3 r e l a t i n g t o a s s e s s m e n t ye a r s 1 9 9 7 - 9 8 t o 1 9 9 9 - 2000 against the penalty levied u/s 271(1)(c) of Income Tax Act, 1961(in short 'the Act').
2. The only ground of appeal raised by the assessee in all the three appeals reads as under:
"1. The Ld. CIT(A) has erred on facts and law in upholding the levy of penalty u/s 271(1)(c), without affordidng the opportunity of hearing, while the 'records' for 'case proceedings' have not been provided by the AO so as specifically prayed for."
3. All th e s e t h r e e ap p e a l s r e l a t i n g t o t h e s a m e a s s e s s e e a g a i n s t levy of penalty u/s 271(1)(c) of the Act were heard together and are 2 being disposed off by this consolidated order for the sake of convenience.
4. The facts of the three appeals before us are identical and reference is made to the facts in ITA No.784/Chd/2013 to adjudicate the issue.
5. The issue raised in the present bunch of appeals is relating to a s s e s s m e n t ye a r s 1 9 9 7 - 9 8 t o 1 9 9 9 - 2 0 0 0 a r e i n r e l a t i o n t o l e v y o f p e n a l t y u/s 271(1)(c) of the Act.
6. The brief facts of the case are that survey operation under section 133A of the Act was conducted at the business premises of the assessee on 17.2.1999. During the course of survey duplicate set of books of account were found and were impounded by the survey team. The assessee was engaged in commission business and purchase and sale of food grains. According to duplicate set of books of account DDIT (Investigation), Rohtak worked out gross profit of the assessee for the a s s e s s m e n t ye a r 1 9 9 7 - 9 8 a t R s . 4 , 6 3 , 2 4 7 / - a g a i n s t t h e g r o s s p r o f i t o f Rs.1,19,440/- declared by the assessee. Reassessment proceedings were initiated under section 147 of the Act by issue of notice under section 148 of the Act. In response to the said notice the assessee furnished return of income declaring total income of Rs.46,520/- and agricultural income of Rs.1,02,000/-. The assessment under section 143(3) r.w.s. 147 of the Act was completed on total income of Rs.5,78,118/- by making the following additions:
(i) Interest income Rs.3,47,301/-
(ii) Commission income Rs. 38,050/-
(iii) Undisclosed interest income Rs.1,32,548/-
(iv) Trading profit Rs. 13,699/-
7. Similar additions were made on the basis of duplicate set of books o f a c c o u n t i n a s s e s s m e n t ye a r s 1 9 9 8 - 9 9 a n d 1 9 9 9 - 2 0 0 0 . The CIT 3 ( A p p e a l s ) d i s m i s s e d t h e a p p e a l s o f t h e a s s e s s e e f o r a s s e s s m e n t ye a r 1997-98 and 1998-99 as out of time and dismissed the appeal for a s s e s s m e n t ye a r 1 9 9 9 - 2 0 0 0 o n m e r i t s . The dismissal of the appeals by the CIT (Appeals) was not challenged before the Tribunal. The Assessing Officer thereafter levied penalty u/s 271(1)(c) of the Act at Rs.2,50,000/- relating to assessment year 1997-98, Rs.65,000/- relating t o a s s e s s m e n t ye a r 1 9 9 8 - 9 9 a n d R s . 4 5 , 0 0 0 / - r e l a t i n g t o a s s e s s m e n t ye a r 1999-2000.
8. The CIT (Appeals) in the first round vide consolidated order dated 3.7.2007 deleted the penalty on the ground that no satisfaction was recorded by the Assessing Officer in the assessment order for initiating proceedings u/s 271(1)(c) of the Act.
9. The Revenue filed appeals before the Tribunal which in ITA Nos.854 to 856/Chd/2007 vide order dated 30.11.2010 restored the issue back to the file of the CIT (Appeals) in view of sub-section 1(B) inserted in section 271 of the Act by Finance Act 2008 and with retrospective effect from 1.4.1989. The CIT (Appeals) in the second round of proceedings considered the levy of penalty u/s 271(1)(c) of the Act on the merits of the case. The plea of the assessee before the CIT (Appeals) was as under:
"Concealment of income and furnishing of inaccurate particulars are two different things. Both of them refer to deliberate act on the part of the assessee. A mere omission or negligence would constitute a deliberate act of concealment of income or furnishing inaccurate particulars.
The additions made to the declared income are based on the parallel set of books of accounts found in the course of survey at the business premises of the assessee. It is submitted that in the course of assessment proceedings for all the years, the assessee had offered necessary income which could be taxed as income of the assessee and therefore mere fact of certain additions cannot be made the basis to levy penalty u/s 271 (1) (c). The AO made much emphasis on the fact that since there was detection as a result of survey, penalty levied is wholly justified. It is submitted that such a conclusion is misconceived as mere detection of books of accounts in the survey, for which income was duly offered in the course 4 of assessment proceedings, cannot be ground to levy the penalty. It has been held by Hon'ble Apex Court in the case of K.C. Builders and another Vs ACIT, 265 ITR 562 that element of mens-rea is an essential pre-condition before levying penalty u/s 271 (1) (c) of the Act."
10. The CIT (Appeals) vide para 6 held as under:
"6. I have carefully considered the issue and the submissions made by the AR. It is an admitted position that duplicate books of accounts were found during the survey operations. It is also an admitted position that the real income earned by the appellant was reflected in the duplicate books of accounts whereas the income admitted in the return of income filed by the appellant is based on the books of accounts prepared for the purpose of the Department. The fact of maintaining duplicate books of accounts cannot be termed as omission/negligence on the part of the appellant by any stretch of imagination. The argument that since the appellant had offered necessary income during the course of proceedings, penalty u/s 271 (1) (c) is not leviable is misplaced and misconceived as the appellant was forced to admit the income having been caught with the duplicate books of accounts. The case of the appellant squarely falls under concealment of income. It is now well settled law that mens-rea is not a pre-condition before levying penalty u/s 271 (1) (c). In any case, the fact of maintaining duplicate books of accounts shows the guilt mind of the appellant to conceal the particulars of income. In view of the above, it is held that it is a fit case for levy of penalty u/s 271 (1) (c) and therefore the penalty levied by the AO for all the 3 years under appeal is upheld and the grounds of appeal are dismissed."
11. The assessee is in appeal against the said order of the CIT (Appeals). The learned A.R. for the assessee stressed that there was no representation before the CIT (Appeals)that the appeal may be restored back to the file of the CIT (Appeals). In respect of the merits of lev y of penalty levied u/s 271(1)(c) of the Act the learned A.R. for the assessee only placed reliance on the grounds raised in the appeal.
12. The learned D.R. for the Revenue pointed out that sufficient opportunity was allowed by the CIT (Appeals) in the second round of proceedings and the assessee did appear on one of the dates of hearing but failed to appear before the CIT (Appeals) on the different dates of hearing. The learned D.R. for the Revenue further pointed out that additions in the case were made in the hands of the assessee because of the entries in the duplicate set of books of account found from the p o s s e s s i o n o f t h e a s s e s s e e d u r i n g t h e c o u r s e o f s u r v e y, w h i c h w e r e 5 impounded and copies of the same were given to the assessee and even show cause notices were given before making said additions.
13. We have heard the rival contentions and perused the record. The first grievance of the assessee before us is that no proper opportunities of hearing have been afforded to the assessee by either the Assessing Officer and/or the CIT (Appeals). The grievance of the assessee, as per the ground of appeal against the Assessing Officer is for not providing the records before completing the assessment. In the facts of the present case survey under section 133A of the Act was carried out at the premises of the assessee on 17.2.1999 and duplicate set of books for the year under appeal were found. According to the duplicate set of books of accounts, certain entries as found in the duplicate set of books of account were not appearing in the regular books of account maintained by the assessee. The DDIT (Inv.) computed the gross profit of the assessee from the duplicate books of account at Rs.4,63,247/- as against gross profit of Rs.1,19,440/- declared by the assessee in the return of i n c o m e f i l e d f o r a s s e s s m e n t ye a r 1 9 9 7 - 9 8 . The Assessing Officer also verified the above said gross profit as per the duplicate books of account and thereafter initiated proceedings under section 147/148 of the Act. The assessee in response thereto filed return of income declaring income at Rs.46,520/- plus agricultural income at Rs.1,02,000/-. During the course of assessment proceedings various notices were issued to the assessee including show cause notice alongwith detailed questionnaire to produce all original documents which were identified at the time of survey and also to produce regular books of account maintained by the assessee. In response the assessee claimed that the details could not be prepared and filed as books of account were in the possession of the department. The assessee sought photocopies of the parallel set of books 6 of account found at the time of survey, which were impounded later on by the department. The Assessing Officer in the assessment order had given a finding that photocopies of the parallel set of books of account as required by the assessee were given to him on the same date on which he has applied for the same. Further during the course of assessment proceedings the assessee was asked to furnish the Profit & Loss Account, trading account and Balance Sheet on the basis of parallel set of books of account which were prepared by the assessee and filed vide reply dated 18.1.2000. Further the original documents which were identified at the time of survey were also produced by the assessee and were got verified with reference to the parallel set of books of account as well as with the entries in regular books of account. The Assessing Officer further noted that the impounded documents were examined in details and verified with the impounded books of account. All the above said proceedings were noted in the assessment order in paras 1 and 2 of the assessment order. Relevant findings of the Assessing Officer are as under:
"During the course of assessment proceedings, the assessee was asked to furnish the profit and loss account, trading account and balance sheet etc. on the basis of parallel set of books of accounts, photocopies of which was given to him. The assessee vide its reply dated 18.1.2000 has furnished the balance sheet, profit & loss account, trading account and capital account on the basis of parallel set of books of accounts along with details of sundry creditors and sundry debtors and details of interest received and paid. The original documents which were identified at the time of survey (photocopies of which were obtained by the DDIT(Inv), Rohtak were produced and these were got verified with reference to the parallel set of books of account as well as with the regular account books. The impounded documents were examined in details and verified with the impounded books of accounts."
14. Thereafter the Assessing Officer had computed the income on the basis of the duplicate set of books of account found during the course of survey and later impounded the same. The addition was made in the hands of the assessee on account of following discrepancies: 7
(i) Interest income Rs.3,47,301/-
(ii) Commission income Rs. 38,050/-
(iii) Undisclosed interest income Rs.1,32,548/-
(iv) Trading profit Rs. 13,699/-
14.
15. In view of the above said proceedings before the Assessing Officer we find no merit in the ground of appeal raised by the assessee that the CIT (Appeals) has erred in upholding levy of penalty u/s 271(1)(c) of the Act without affording opportunity of hearing, while records of case proceedings have not been provided by the Assessing Officer, as s p e c i f i c a l l y p r a ye d f o r .
16. In respect of the grievance of the assessee of reasonable opportunity of hearing being not provided by the CIT (Appeals), it appears that after the levy of penalty by the Assessing Officer vide order dated 8.3.2006, the CIT (Appeals), Rohtak vide order dated 3.7.2007 had cancelled the penalty proceedings on the ground that no satisfaction of the Assessing Officer was recorded in the assessment order for initiating proceedings u/s 271(1)(c) of the Act. The Revenue filed an appeal before the Tribunal and the Tribunal in ITA Nos.854 to 856/Chd/2007 vide order dated 30.11.2010 restored issue back to the file of the CIT (Appeals) holding that in view of sub-section 1(B) inserted in section 271 of the Act the directions given in the assessment order for initiation of penalty proceedings u/s 271(1)(c) of the Act would constitute satisfaction of the Assessing Officer for initiating penalty proceedings u/s 271(1)(c) of the Act. As the CIT (Appeals) had not decided the issue on merits, the issue was set aside to the file of the CIT (Appeals).
17. The present appeal filed by the assessee is against second round of proceeding before the CIT (Appeals), who had given various opportunities to the assessee and the assessee except for one date of 8 hearing had failed to appear before the CIT (Appeals). The relevant findings of the CIT (Appeals) vide para 3 are as under:
"3. In terms of the above mentioned directions of Hon'ble ITAT the appeals have been taken up for hearing. Notice of hearing u/s 250 of the IT Act dated 05.12.2012 was issued for hearing on 17.12.2012 which did not evoke any response from the appellant. Thereafter another notice dated 08.12.2012 was issued for which Sh. Gurjeet Singh, C.A., AR submitted letter dated 05.01.2013 received in this office on 08.01.2013 requesting that the case may be adjourned for 15 days. The case was accordingly posted to 22.01.2013. On the said date, Sh. Gurjeet Singh, C.A., AR was present before me and requested for adjournment of one month. As the appeal has been pending for a long time, as a last and final opportunity, adjournment of one month was granted to 21.02.2013. However, neither any body was present on the said date nor any adjournment was sought. In view of the above, I proceed to dispose the appeals as per the material available on record and as per the submissions made earlier before my predecessor."
18. In view of the above said findings of the CIT (Appeals) where various opportunities have been allowed to the assessee in the second round of proceeding before the CIT (Appeals), we find no merit in the objection raised by the assessee in the submissions made by the assessee that the CIT (Appeals) has erred for confirming the penalty u/s 271(1)(c) of the Act without affording opportunity of hearing to the assessee.
19. Now coming to the imposition of penalty u/s 271(1)(c) of the Act on the additions made on the basis of parallel set of books of account and entries from impounded documents found during the course of s u r v e y. The assessee was maintaining regular books of account and had f u r n i s h e d t h e r e t u r n o f i n c o m e f o r t h e ye a r u n d e r c o n s i d e r a t i o n d e c l a r i n g gross profit of Rs.1,19,440/- and return of income of Rs.44,030/-. During the course of survey conducted at the premises of the assessee under section 133A of the Act parallel set of books of account were found and the DDIT (Investigation), Rohtak worked out the gross profit from the said parallel books of account. The assessee was asked to furnish the return of income in response to notice issued under section 147/148 of the Act. The assessee in the said return of income declared 9 total income of Rs.46,520/-, overlooking the entries in the duplicate set o f b o o k s o f a c c o u n t f o u n d d u r i n g t h e c o u r s e o f s u r v e y. The addition in the present appeal on account of four counts have been made by the Assessing Officer after detailed enquiries which are as under:
a) The main source of income of the assessee was interest income being charged from zamindar to whom loans were advanced. Verification exercise was carried out by the Assessing Officer and it was found that the interest received as shown in the parallel books of account was extra to the interest received as shown in the books of account. The addition to the extent of Rs.3,47,301/- was made in this regard.
b) Some of the transactions of commission income made in the parallel books of account were not recorded in the regular books of account and the difference of Rs.38,050/- was added to the income of the assessee.
c) Certain documents were maintained by the assessee to record k a c h c h a e n t r y r e g a r d i n g s a l e o f c r o p s a n d p a ym e n t s m a d e t o a g r i c u l t u r i s t s d u r i n g t h e a s s e s s m e n t ye a r 1 9 9 7 - 9 8 , w h i c h i n t u r n were transferred to the duplicate books of account. On thorough investigation of the documents No.8-A,12-A and 14-A, found and identified at the time of survey operation, it was noted by the Assessing Officer that the interest charged or chargeable was not accounted in the parallel books of account but was carried forwarded in the accounts book alongwith outstanding balance.
The discrepancy totaling Rs.1,32,548/- was added to the income of the assessee.
10
d) The assessee had earned profit of Rs.13,699/- from bardana sarson, gram, khal and wheat account, which was not disclosed in the books of account and consequently addition of the Act Rs.13,699/- was made.
19. The above said additions have been confirmed by the CIT (Appeals), against which the assessee is not in appeal. In the totality of the above said facts and circumstances where the assessee was found to be maintained duplicate books of account and earning the income outside the regular books of account maintained by the assessee on the basis of which the return of income was filed, establish the contemptuous conduct of the assessee in not declaring the correct income to the department. Further documents were also found during survey showing additional income earned by the assessee. This is a fit case for levy of penalty u/s 271(1)(c) of the Act. Upholding the order of CIT (Appeals) w e c o n f i r m t h e p e n a l t y a t R s . 2 , 5 0 , 0 0 0 / - i n a s s e s s m e n t ye a r 2 0 0 7 - 0 8 . The ground of appeal raised by the assessee is thus dismissed.
20. The facts and the issues arising in ITA No.785 & 786/Chd/2013 are similar to the facts and issues in ITA No.784/Chd/2013. Our decision in ITA No No.784/Chd/2013 shall apply mutatis mutandis to ITA No.785 & 786/Chd/2013.
21. In the result, all the three appeals filed b y the assessee are dismissed.
Order pronounced in the open court on this 30th day of September, 2013.
Sd/- Sd/-
(T.R.SOOD) (SUSHMA CHOWLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 30 t h September, 2013
*Rati*
Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh 11