Penalty under section 271(1)(c) get attracted if income is not disclosed voluntarily but it disclosed in pursuance of action by department
Short overview of the case:
Assessee did not disclose income voluntarily but it was disclosed in pursuance to survey conducted under section 133A. Had there not been survey, the assessee would not have offered such undisclosed income, penalty under section 271(1)(c) was correctly levied by AO.
During survey, certain documents were found and seized and assessee offered undisclosed income. Accordingly, AO levied penalty under section 271(1)(c). Assessee challenged this.
It is held that assessee did not disclose income voluntarily but it was disclosed in pursuance to survey conducted under section 133A. Had there not been survey, the assessee would not have offered such undisclosed income, penalty under section 271(1)(c) was correctly levied by AO.
Decision: Against the assessee.
IN THE ITAT, RAJKOT BENCH
RAJPAL YADAV, J.M. & WASEEM AHMED, A.M.
Kashish Enterprise v. ITO
ITA No. 256/Rjt/2014
15 October, 2018
Assessee by: M.J. Ranpura, Authorised Representative
Revenue by: Praveen Verma, Sr. Departmental Representative
Waseem Ahmed, A.M.
The captioned appeal has been filed at the instance of the assessee against the appellate order of the Learned Commissioner (Appeals)-II, Rajkot (“Commissioner (Appeals)” in short) relevant to assessment year 2009-10.
- Assessee has raised the following grounds of appeal :–
“1.0 The grounds of appeal mentioned hereunder are without prejudice to one another.
2.0 The learned Commissioner (Appeals)-II, Rajkot (Commissioner (Appeals)) erred in facts as also in retaining levy of penalty under section 271(1)(c) of the Act on income of Rs. 55,53,360. The penalty under section 271(1)(c) of the Act may kindly be deleted.
3.0 The Honor’s appellant craves leave to add, amend, alter or withdraw any or more grounds of appeal on or before the hearing of appeal.”
- The solitary issue raised by assessee is that learned Commissioner (Appeals) erred in confirming the penalty under section 271(1)(c) of the Act for Rs. 55,53,360.
- Briefly stated facts are that the assessee is partnership firm and engaged in the business of Civil Construction. There was a survey under section 133A of the Act at the premises of the assessee dated 28-10-2010 and 29-10-2010. As a result of survey certain documents were found and seized bearing annexure no.B-1 to B- 27.
4.1 The assessee during the relevant year was constructing the commercial complex known as Kashish Arcade. As per the seized material bearing no B-27, it was found that certain transactions were made by the assessee without recording in the books of accounts. The assessee determined the profit based on survey materials for Rs. 37,83,981 for the year under consideration. However, the assessee in response to the notice issued under section 148 of the Act filed its return of income declaring total income of Rs. 53,09,666 only.
4.2 The assessing officer was not satisfied with the working of the assessee and the books of accounts filed during the course of hearing. Accordingly, the assessing officer invoked the provision of section 145(3) of the Act and estimated the profit @20% of its gross receipts. Thus, the assessing officer worked out the profit of Rs. 59,49,656 (20% of 2,97,48,281). Accordingly, the assessing officer made the addition of Rs. 6,39,990 (59,49,656-53,09,666) and added to the total income of the assessee. Accordingly, the assessing officer completed the assessment proceedings under section 143(3) read with section 147 of the Act vide Order, dt. 11-10-2011 at Rs. 59,49,656. The assessing officer during the assessment proceedings initiated the penalty proceedings under section 271(1)(c) of the Act on account of concealment of the particulars of income.
4.3 Subsequently, the assessing officer issued notice under section 274 of the Act dated 21-2-2012 for levying the penalty under section 271(1)(c) of the Act. The assessee in compliance to it submitted its reply dated 7-11-2011 that it has neither concealed the particulars of income nor furnished the inaccurate particulars of income.
However, the assessing officer disregarded the contention of the assessee. The assessing officer further observed that the assessee has filed his original return of income declaring income of Rs. 1,46,640 only. Thus the assessing officer was of the view that the assessee has concealed his income amounting to Rs. 58,03,020 (Rs. 59,49,660–Rs. 1,46,640) and accordingly levied the penalty of Rs. 17,93,140 being 100% of tax sought to be evaded for furnishing the particulars of income.
- Aggrieved, assessee preferred an appeal to learned Commissioner (Appeals). The assessee before the learned Commissioner (Appeals) submitted that the penalty if at all is to be levied then it should have been levied on Rs. 6,39,990 being the difference in the amount between the income declared in the return filed under section 148 of the Act and the income assessed by the assessing officer in the assessment framed under section 147 of the Act.
5.1 The assessee without prejudice to the above submitted that the addition was made by the assessing officer for Rs. 6,39,990 on estimated basis. Therefore there is no question of any penalty in respect of the addition which was based on estimation. The assessee in respect of his claim relied on various orders of the Hon’ble Courts.
However, the learned Commissioner (Appeals) disregarded the contention of the assessee and confirmed the order of assessing officer in part by observing as under :–
“6.4 I have carefully considered the submission of the appellant and the assessment as well as penalty order. There is no dispute as to facts. However, it is pertinent to mention here that the quantum appeal in this case against order under section 143(3) read with section 147 has already been decided and the appeal order has been passed by the undersigned vide order in Appeal No. Commissioner (Appeals)-II/Rjt/0188/11-12, dt. 20-2-2014. In this appeal order, the addition of Rs. 6,39,990 made by the assessing officer has been deleted. Thus, the income returned by the appellant in its return of income tiled in response to notice under section 148 is now required to be considered for the levy of penalty. The first issue required to be answered is whether the penalty under section 271(1)(c) can be levied or not. The appellant has contended that it had suo moto offered additional income in response to notice under section 148. Thus, there is no concealment. It has also been contended that the addition was on estimate basis and hence no penalty can be levied. I find no merit in the contention of the appellant. It is an undisputed fact, which has also been accepted by the appellant, that many entries in Annexure-B/27 were not reflected in the regular books of accounts. The income offered by the appellant in response to notice under section 148 is only after it has been detected by the department and it is not a voluntary act on pail of the appellant. In the case of LMP Precision Enginerring Ltd. v. DCIT (2011) 330 ITR 93 (Guj-HC) : 2011 TaxPub(DT) 31 (Guj-HC), the Hon’ble Gujarat High Court has held as under :–
“The law on the subject of treating a revised return of income as voluntary or otherwise is well-settled. Merely because a return is revised that fact by itself cannot lead to any presumption as to concealment in the original return of income, because Legislature itself has Provided for furnishing a revised return in case of any omission in the original return. Albeit such omission has to be inadvertent and bona fide. If the omission is intentional the revised return cannot absolve an assessee. The fact that the department has initiated certain inquiries per se would not be sufficient to treat the revised return as not being voluntary. This would depend on facts of each case considering the stage at winch the investigation has progressed, the subject-matter of investigation by the department, and the evidence available in the course of such investigation.
- If the aforesaid principles are applied to the facts of the case, it can safely be noted that the overall conduct of the assessee does not indicate that the revised returns were filed voluntarily and in good faith. In fact, the first disclosure on 20-10-1988 came in pursuance of the inquiries undertaken by DD1T (Inv,). Mumbai and after statement of Chairman and Managing Director in relation to the subject-matter of purchases being recorded on 21-9-1988. For assessment year 1985-86 the assessee, by its very conduct, acted contrary to its own stand of the revised return being voluntary when the assessee itself revised the revised return under Letter, dt. 30-3-1990by disclosing a further sum of Rs. 78 lakhs and odd. It is (rue that mere fact of not challenging the assessment order per se would not be indicative of any acceptance that there was concealment of income, but in (he facts of the present case, the said fact of the assessee not having challenged, any of the assessment orders for the three years under consideration, assumes significance. This fact on its own, as a solitary factor may not be sufficient but read in conjunction with overall conduct of the assessee would definitely be a pointer to the factum of assessee having indulged in an act of concealment of income in the form of unverifiable purchases.”
6.5 Similar view has been taken by the Hon’ble Kerala High Court in case of CIT v. A. Srinivasa Pal (2000) 242 ITR 29 (Ker-HC) : 2000 TaxPub(DT) 983 (Ker-HC). In the case of CIT v. K. A. Sampat Reddy 197 ITR 232. the Hon’ble. Karnataka High Court has held that when survey of business premises led to impounding of books which revealed various erroneous entries, the imposition of penalty was valid since the revised return was filed only after discovery of concealment by the revenue. The facts of the present case are very much covered by the above decisions. In the present case, first of all, the return is not a revised return but has been filed in response to the notice under section 148. This has been filed after the survey action where the books were impounded and discrepancies in the same were noted. The act of filing of the return in response to notice under section 148 cannot be said to be a voluntary action on part of the appellant. It goes without saying that had the appellant not filed this return and not offered this income, the addition was inevitable as it was very vividly demonstrated in the impounded books. This is a very clear case of concealment of particulars of income and the assessing officer is justified in levying the penalty under section 271(1)(c). The action of the assessing officer is confirmed.
6.6 The issue is about the quantum of the income on which tax was sought to be evaded. The appellant had offered an income of Rs. 57,00,000 in the return filed in response to notice under section 148. The income returned in the original return of income was Rs. 1,46,640. The appellant had thus shown additional income of Rs. 55,53,360. The assessing officer had levied penalty on concealed income of Rs. 58,03,020. However, as per the appeal order regarding, the quantum addition, the addition of Rs. 6,39,990 has been deleted. Thus, the income on which tax sought to be evaded now stands at Rs. 55,53,360. The assessing officer is directed to recompute the penalty @ 100% of tax sought to be evaded on this amount.”
Being aggrieved by the order of learned Commissioner (Appeals) assessee is in appeal before us.
- The learned Authorised Representative before us reiterated the submission as made before the learned Commissioner (Appeals).
- On the other hand, learned Departmental Representative before us submitted that the income was offered by the assessee as a result of survey. Thus, it is clear that the assessee would not have disclosed his income, had there not been survey proceedings under section 133A of the Act. The learned Departmental Representative vehemently supported the order of authorities below.
- We have heard the rival contentions and perused the materials available on record. The facts of the case as discussed above are not in disputed therefore we are inclined not to repeat the same for the sake of brevity and convenience. 8.1 It is a fact on record, the assessee did not disclose the income voluntarily but it was disclosed in pursuance to the survey conducted under section 133A of the Act. During the course of survey, certain documents were found and seized which were sufficient enough to make the addition in the hands of the assessee. Therefore the assessee has disclosed income of Rs. 53,09,666. Thus, in our considered view had there not been survey under section 133A of the Act, the assessee would not have offered such undisclosed income. Therefore, in our considered view, the penalty under section 127(1)(c) of the Act was correctly levied by the authorities below. In this regard, we also find support and guidance from the judgment of Hon’ble Jurisdictional High Court in the case of (2011) 330 ITR 93 (Guj-HC) : 2011 TaxPub(DT) 31 (Guj-HC) reported in (2011) 330 ITR 93 (Guj-HC) : 2011 TaxPub(DT) 31 (Guj-HC). The relevant extract of the order is already been reproduced hereinabove. Thus, we do not find any reason to disturb the finding of learned Commissioner (Appeals). Hence, the ground of appeal of the assessee is dismissed.
- In the result, appeal of the assessee is dismissed.