TMI Blog2008 (6) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... d and the order of the Assessing Officer be restored." 2. In the cross-objection, the assessee has raised following ground: "BECAUSE the learned CIT (Appeals) should have, inter alia, held that the penalty order that had been impugned before him, was not maintainable as the requisite satisfaction had not been recorded." 3. The facts of the case are that assessee has filed return of income on 31-7-2001 declaring total income of Rs. 2,36,650. Besides salary income, income from trading in shares has also been declared. The assessee has also included the income of his minor children, namely, Master Shalab Agarwal, Master Rishab Agarwal and Miss Swati Agarwal amounting to Rs. 17,993 in all. The return was processed on 1-2-2002 on the returned income and thereafter, the Assessing Officer issued notice under section 143(2) on 14-2-2002 fixing the date for compliance on 1-4-2002. It seems that no compliance thereof was made. In the meantime, as mentioned in the penalty order, the Investigation Wing at Kanpur carried out enquiries In respect of certain group of persons who were running a racket of giving entries by way of gifts. Some persons had opened accounts in the name of fictitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded the sum of Rs. 3 lakhs being alleged gifts and declared in the revised return as assessee's income. The assessment was completed on 26-2-2004 on the income as per return dated 5-2-2003. The Assessing Officer also simultaneously initiated penalty proceedings under section 271(1)(c) of the Act. 4. In response to penalty notice, the assessee furnished following reply: "It is being respectfully submitted that neither any income has been concealed nor any particulars of income have been concealed by the petitioner's assessee justifying the issue of Penalty Notice under section 271 (1)(c). Apparently, the facts and the chronological sequence of events have not been judicially appreciated due to such subjective inference drawn the penalty proceedings have been wrongly initiated. The petitioner assessee being law abiding citizen had made due, proper on time compliances as per legal advice(s) received from time to time which have wrongly been adjudged as unqualified acceptance of alleged deliberate concealment of income/particulars of income. The revision of return was done before the issue of any notice. Thus, the totality of circumstances when are seen judicially Appreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts, circumstances and material on record when seen objectively in the light of well-settled position of law regarding deeming income on account of unexplainable credits penalty is not leviable/exigible." 6. The Assessing Officer, however, did not agree with the explanation of the assessee and held that it is not disputed that the gifts were bogus entries and reflected undisclosed income of the assessee. The return filed by the assessee could not be said to be revised return because there is no omission or wrong statement in the original return and conditions as laid down under section 139(5) are not satisfied. While filing the original return assessee was aware about the genuineness of the gift in the name of the children. Prior to filing of return on 5-2-2003, the department had reasonable evidence in the form of copies of bank account of the donors and the admission of many of them that they were providing only accommodation entries of gifts and, therefore, the whole exercise made by the assessee was to conceal/launder the income in the guise of gifts. According to the Assessing Officer, it was a deliberate attempt of the assessee to conceal the amount of Rs. 3 lakhs. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of Rs. 3 lakhs claimed to be received as gifts, as there were not required to be disclosed in the return of income of the appellant. However, subsequently, the appellant has offered this amount to tax under section 64 of the Income-tax Act. It has obviously been done to avoid protracted litigation. The penalty proceedings and assessment proceedings are two distinct and separate proceedings. A mere issue of summons to the appellant does not indicate detection of concealment by the department at that point of time, particularly when the summon does not refer to the gifts received by three minor children of the appellant. The very fact that the Assessing Officer has framed the assessment order on the revised return of income clearly indicates that Assessing Officer has validated the revised return. In such situation, the Assessing Officer cannot take the plea that the revised return of income filed by the appellant is illegal and unlawful. For the purpose of levying penalty under section 271(1)(c), the whole circumstances and sequence of events are required to be considered. In the present case, the conduct of the appellant clearly illustrates that the appellant offered Rs. 3,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicate that department had information about gifts given to the children of the assessee and there is no material enclosed with the summons to show that such gifts are bogus. Further, assessment was not completed on the basis of original return. Therefore, assessee had a right to file the revised return under section 139(5). In fact, if we believe on information contained in the penalty order then Assessing Officer had information only in respect of one gift from Shri Vimlesh Kumar and he did not have any information in respect of other two gifts. Therefore, it could not be said that Assessing Officer had detected anything in respect of the other two gifts. The ld. AR relied on the decision of Hon'ble Allahabad High Court in the case of Bhairav Lal Verma v. Union of India [1998] 230 ITR 855, wherein the concept of voluntarily filing of return has been dealt with in detail. He also referred to the decision of Hon'ble Supreme Court in the case of CIT v. Suresh Chandra Mittal [2001] 251 ITR 9. Then, a reference was made to the decision of ITAT 'B' Bench in the case of Santosh Narain Kapoor v. Dy. CIT [IT Appeal No. 1272 (Luck.) of 2006 for assessment year 2000-01, dated 25-1-2008], ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal minor son of assessee, Shri Deepak Agarwal. Thereafter, the department required the Principal Officer of Oriental Bank of Commerce to give the details of the account of Master Shalab Agarwal. After receiving all these particulars, summon was issued to assessee on 30-1-2003 asking him to provide information in respect of Master Shalab Agarwal and to bring all the passbooks and copies of income-tax return for assessment year 2000-01 and onwards. No compliance thereof was made. The assessee then on 5-2-2003 filed another return disclosing a sum of Rs. 3 lakhs received by him as gift. Thereafter, on 11-2-2003 during the course of statement recorded by the Investigation Wing, the assessee admitted to have received gift amounting to Rs. 1 lakh each in the name of his three minor children and in absence of sufficient proof he is surrendering them voluntarily in the revised return. It is also undisputed fact that neither in the assessment order nor in the penalty order there is any information as to whether department had any information about bogus nature of gifts in respect of two other donors, namely, Shri Kailash Prasad Agarwal and Smt. Sashi Kala Agarwal. Even though it is in gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. There is also no material placed on the record by the assessee so as to infer therefrom that a transaction (gift) which originally did not carry the characteristics of income, when original return was filed, has now become taxable which necessitated to file a revised return. Onus is on the assessee to prove that circumstances have changed, something new has happened beyond his control, that he cannot prove the gifts. If no material is placed by the assessee, then change of opinion by the assessee, originally claiming that gifts are genuine and gift deeds are filed and later when department starts enquiry into the racket, suddenly coming forward and declare the gifts as income, cannot be held to be bona fide. In the present case, there is no material to show that this was a genuine omission or a wrong statement in the original return. The right to revise the return under section 139(5) is not free from fetters. It is not a case that assessee can at his own Will include or exclude any item of income in the revised return. The right to revise the return under section 139(5) is available only when assessee discovers any omission or wrong statement in the return originally filed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed view, revised return filed on 5-2-2003, does not qualify as revised return within the meaning of section 139(5) as there is no discovery of any omission or wrong statement in the original return filed on 31-7-2003. 15. In this regard, we are persuaded to refer to comments of Hon'ble Madras 'High Court in the case of Addl. CIT v. C.R. Ranganathan Chetty [1985] 153 ITR 456, on the general practice of showing receipt of gifts from strangers. The comments are as under: "Look at the way the gifts were made. Not only were made to other people's children, but some of them were made to other people's wives. In any place, excepting in a tax court, gifts to other people's wives, even if they are wives of co-partners, would raise a host of questions and not a few eye-brows, excepting when there is an understanding nod, "Ah, it is all for purposes of income-tax". The ITO saw the facts with a layman's eyes, which was the correct way to look, at them. The Tribunal for their part, however, got involved in the convolutions of the Mitakshara law of gifts and brought to bear a dry and unreal legalistic approach to the application of section 64, which the provision does not call for, if we und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untary' in section 273A means out of free Will without any compulsion. Discovery of concealed income after department has seized the incriminating material with regard to the income so disclosed cannot be said to be voluntary disclosure. It is made under the apprehension of exposure to adverse action by the department. The question as to whether a particular disclosure is voluntary or not has to be decided by the department in each case on the basis of the material on record. If the department does not have any incriminating material on record with regard to the disclosed income then disclosure would be voluntary otherwise not. In any case, above decision would not be applicable in the context of deciding levy of penalty under section 271(1)(c) of the Act. 19. In the case of Suresh Chandra Mittal, there was a search and seizure operation under section 132 in the case of the assessee. Notice under section 148 was issued. Originally, prior to search, assessee has filed return showing meagre income. After. notice under section 148, assessee revised return and declared higher income. It was also claimed that he had offered additional income to buy peace of mind and avoid litigation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of those particulars, then penalty could not be levied. It was further held by Hon'ble High Court that finding of the Tribunal could not be disturbed unless it is based on no material or is perverse or is based on irrelevant or extraneous considerations or is arrived at by the application of wrong principles of law. CIT v. Punjab Tyres [1986] 162 ITR 517-In this case, it was held by the Hon'ble M.P. High Court that it is not an inflexible rule that when assessee agrees to have certain items included in his total income he makes an admission which by itself would warrant the imposition of penalty. During the course of enquiry into certain investments, the assessee agreed to the additions of such unexplained investment. It was held that department has to prove that amount represented concealed income of the assessee found during the relevant accounting year. CIT v. Haji Gaffar Haji Dada Chini [1988] 169 ITR 33 (Bom.)-In this case, assessee offered credits in respect of hundi loans for assessment. It was held that it did not amount to admission of concealment of income. In other words, there was no material with the revenue except surrender of certain income by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the officers and subject to no penalty. Reassessments were made but there was no finding in the order that assessee has concealed income. As there was no finding of concealment of income, penalty was cancelled. 21. In respect of other judgments referred to by the ld. AR, copies of judgments have not been provided to us and, therefore, we are unable to consider them. In any case, we are considering the issue in the present case on the facts and circumstances as found by the Assessing Officer in the assessment and penalty proceedings. 22. Now, we refer to other certain authorities on the issue as to when an item of income declared in revised return would be considered voluntary and when it will not be so. 23. Kamal Chand Jain v. ITO [2005] 277 ITR 429 (Delhi)-The assessee had filed a return of Rs. 1,00,880 originally. Later, when Assessing Officer asked the assessee to explain the source of a credit of Rs. 11,99,242 and to furnish balance sheet for the immediately preceding year, the assessee surrendered a sum of Rs. 3,77,950 out of it. The Assessing Officer initiated penalty proceedings. The Tribunal confirmed the penalty. In appeal, the Hon'ble Delhi High Court held that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing full particulars of income in the return, some bona tide omission or some wrong statement may have occurred. In order to obviate this possibility, the Legislature has enacted section 139(5) enabling the assessee to furnish a revised return. But to come under the said provision, the omission or wrong statement that might have occurred or crept in, (i) must be bona tide, and (ii) must have been discovered by the assessee himself. If, however, the omission or wrong statement is discovered by the department as a result of enquiry and thereafter a revised return is furnished making amendments that will not amount to a revised return as contemplated under section 139(5)." 25. In the case of F.C. Agarwal v. CIT [1976] 102 ITR 408 (Gauhati), it was held that revised return could be filed only when assessee discovers some omission or wrong statement in the original return. The revised return must fall within the correct ambit and scope of section 139(5) and even if where discovery of omission or wrong statement was made by the assessee that itself is not sufficient to bring the revised return within the ambit of section 139(5). It has to be further shown that such omission or wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther requirement is that this omission or wrong statement in the original return must be due to bona fide inadvertence or mistake on the part of the assessee. Held, that it could be seen that from the original return there had been a staggering difference in the second revised return filed and no particulars had been pointed out to explain that the revised returns were merely the result of inadvertent mistake or omission. In that view the Tribunal had come to a definite conclusion that there was no material to support the view that there was any omission, mistake or wrong statement in the original return. This was a finding of fact and no question of law arose." 27. In the case of Union Engg. Co. v. CIT [1980] 122 ITR 719 (Ker.), it was held that where revised return was filed without summons were issued by the Assessing Officer then it could not be said that a revised return was filed voluntarily under section 139(5). In this regard, we refer to relevant head notes as under: "For the assessment year 1961-62, the assessee filed its return on May 30, 1962, showing a total income of Rs. 23,947. In November 1965, the assessee produced the books of account for the year ending M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was, therefore, valid. Section 139(5) did not cover a case, such as this, of a return practically forced on the assessee under imminence of the imposition of penalty. (iii) That the quantum of penalty was essentially in the discretion of the Tribunal, and the Tribunal was justified in restricting the penalty to 100 per cent of the tax sought to be avoided." 28. In the case of Sulemanji Ganibhai v. CIT [1980] 121 ITR 373 (MP), it was held that the omission or wrong statement in the original return which entitles the assessee to file a revised return must be one which is later discovered, i.e., which is unintentional and which occurs because of some mistake of which the assessee is not aware. In this regard, we refer to the head notes from that decision as under: "An assessee incurs penalty under section 271 (1)(c) where he conceals the particulars of his income or furnishes inaccurate particulars of his income. Concealment implies 'intentional suppression of truth or fact known to the injury or prejudice of another'. Further, there can be no concealment until there is a duty to disclose. So an assessee conceals particulars of his income when he intentionally suppresses the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught in the penal provisions relating to evasion of tax and Assessing Officer is in the process of collecting evidence to nail him down. It is not necessary that Assessing Officer should have established concealment of income prior to filing of revised return by the assessee within the ambit of section 139(5). It is not the intention of law to give a right to file a revised return to those assessees who know very well at the time of filing original return that gifts taken by them are not genuine, but are only in an arranged affair and when investigations are started then they came forward and declare them as their income in their revised return. As already discussed above, gift is not an item which could be said to be discovered subsequently as being the income of the assessee required to be disclosed in the revised return, However, there are certain circumstances as already pointed out which may prompt an assessee to declare gift as his income but there has to be some material on record to show that such circumstances existed. 30. In the present case, assessee has not put up any material to show that there were circumstances and event taken place after filing original return tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-2002. Thus, the assessee could revise his return before 1-2-2002 being the date of assessment under section 143(1). However, the assessee has revised his return on 5th Feb., 2003 which is beyond the limit of section 139(4) of the Income-tax Act, 1961." 35. Thus, there is clear finding that assessee has concealed the income of Rs. 3,00,000 and that the revised return is illegal and unlawful. These comments are sufficient for inferring that Assessing Officer has arrived at a proper and lawful satisfaction before levying penalty under section 271 (1)(c) of the Act. It is not necessary that there should be definite words the Assessing Officer should write at the end of the assessment order that he is arriving at the satisfaction about concealing particulars of income or furnishing inaccurate particulars of income by the assessee or that case of the assessee is falling within the ambit of main section 271(1)(c) or in the Explanation. What is necessary is that if such satisfaction can be culled out or is discernible from the body of the assessment order then it would be sufficient compliance of law. In the cases of CIT v. Delhi Corporate House [Appeal No. 966 of 2007, decided on 9-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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