TMI Blog2007 (1) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act before arriving at the total income and included therein was an addition of Rs. 24,27,402 under the head "Income from other sources" with the following narration : "Benefits and perquisites enjoyed as director of the Seven Pvt. Ltd. company in which the assessee is a director as well as person having substantial interest as beneficial owner". The aforesaid addition was contested by the assessee in apeal before the CIT (Appeals) who confirmed the addition by order dated 21-12-1995. No further appeal seems to have been filed by the assessee before the Tribunal. 3. Subsequently, penalty proceedings were initiated for concealment of income under section 271(1)( c ) read with section 274 of the Act on the ground that the assessee had concealed income to the extent of Rs. 24,27,402. The case of the Assessing Officer was like this. The assessee was a shareholder in a number of closely held companies who jointly owned premises at No. 44, New Friends Colony, New Delhi. The premises was purchased by eight companies from B.K. Nehru (HUF) . The assessee had a substantial interest in these companies as defined in section 2(32) of the Act. The premises was given on lease to HCL - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee but of the employer; ( e )The mere fact that the amount was assessed in the hands of the assessee is not enough for the purpose of levy of penalty and it is further required to be shown that there was conscious or deliberate concealment or furnishing of inaccurate particulars of income on the part of the assessee, as held by the Supreme Court in the case of K.C. Builders 265 ITR 562 and in the present case it cannot be said so; and ( f )The addition was made only on the basis of the information gathered from the documents filed by the assessee. Thus, the assessee did not hide anything from the department nor did he file any inaccurate particulars consciously. The requisite mens rea or guilty mind was absent." Having recorded the above findings, the CIT (Appeals) proceeded to cancel the penalty by observing as under : "In the present case, I find that the additions were made on the basis of information gathered from the documents/submissions filed by the appellant during the course of assessment proceedings only. Thus, the circumstances clearly show that nothing ( sic ) hidden from the department and therefore, the appellant cannot be held guilty of filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in accordance with the formula prescribed by Rule 3( a )( iii ) read with Explanation 2 thereto of the Income-tax Rules, 1962. He pointed out that the addition of Rs. 24,27,402 was made not under the head "Salary" but under the head "Income from other sources". He further submitted that though the assessee had not filed any further appeal to the Tribunal against the order of the CIT (Appeals) in quantum proceedings in which the addition of perquisites was confirmed, that does not lead to the conclusion that the assessee concealed his income or furnished inaccurate particulars thereof and in the course of penalty proceedings the entire matter can be re-appraised since penalty proceedings and assessment proceedings are distinct and separate, the findings given in the assessment proceedings not being conclusive for the purpose of levying penalty. He thus argued that the CIT(Appeals) has rightly cancelled the penalty. 7. In the course of the arguments, the learned counsel for the assessee submitted that the Assessing Officer has not recorded the requisite satisfaction in the assessment order to the effect that the assessee had furnished inaccurate particulars of his income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te on account of the accommodation. Page 57 is the certificate of TDS issued by the company to the assessee under section 203 of the Act. The computation of the perquisite on account of company leased accommodation is governed by Rule 3( a )( iii )(A) read with Explanation 2 thereto of the I.T.Rules. It says that the perquisite on account of rent free residential accommodation (unfurnished) shall ordinarily be a sum equal to 10% of the salary due to the assessee for the period during which the accommodation was occupied by him. There is nothing in the assessment order to show that the value computed by the assessee on account of the perquisite is not in accordance with the aforesaid rule. What the Assessing Officer has done is to invoke the provisions of section 2(24)( iv ) of the Act and accordingly has treated the amounts spent by the private limited companies who were the joint owners of the property, in redesigning and in paying lease rent for air-conditioning, as the assessee s income. This provision is as under : "Section 2(24)( iv ) : the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 123 ITR 457 . Therefore, the mere fact that the assessee did not file any further appeal to the Tribunal against the assessment proceedings cannot be decisive of the question that the assessee concealed his income or furnished inaccurate particulars thereof. Much of the discussion in pages 12 to 16 of the assessment order is about how the entire transaction of the lease of the property to the assessee s employer and the incurring of the expenditure on the improvement of the property by the private limited companies which owned the property would result in a benefit or perquisite to the assessee in terms of section 2(24)( iv ). As already noted, the Assessing Officer has not rejected the assessee s plea that whatever perquisite he has received on account of the company leased accommodation has already been shown in the return in accordance with the relevant income-tax rule. The salary income of Rs. 2,04,600 declared in the return includes the perquisite value of Rs. 18,000 arising on account of the company leased accommodation. It is on the very same facts disclosed by the assessee that the Assessing Officer has taken the view, in addition to bringing to tax the perquisite in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a finding given in the assessment proceedings for determining or computing the tax was conclusive. It was, however, good evidence. Before penalty could be imposed, the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars." A similar view has been taken specifically on the above question by the Kerala High Court in CIT v. T. Govindankutty Menon [1989] 178 ITR 509. In this case, additions of Rs. 85,500 were sustained by the Tribunal in the assessment proceedings. However, the penalty levied for this addition under section 271(1)( c ) was cancelled by the Tribunal on making reappraisal of the evidence adduced by the assessee in the assessment proceedings. Affirming the decision of the Tribunal, the Kerala High Court held that "we are of the view that it was open to the Commissioner of Income-tax (Appeals) as also the Appellate Tribunal to advert to the materials or evidence available during the assessment proceedings afresh and make an independent or closer or more intelligent analysis. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant was withheld from him. We also agree with this finding of the CIT (Appeals) and applying the principle laid down in the afore cited cases hold that even on this ground the penalty was rightly cancelled by the CIT (Appeals). Turning now to the question of satisfaction being recorded by the Assessing Officer, we permit the assessee to invoke Rule 27 of the Tribunal Rules to defend the ultimate decision of the CIT (Appeals) on the ground of satisfaction not being recorded by the Assessing Officer, a ground which was rejected by the CIT (Appeals). There is no observation in pages 12 to 16 of the assessment order to suggest that the Assessing Officer had reached the requisite satisfaction. All that the Assessing Officer has stated in these pages is that the amount spent by the private limited companies to improve the property must be treated as a benefit or perquisite obtained by the assessee in his capacity as a director or a person having substantial interest in those companies within the meaning of section 2(32) of the Act. However, there is no recording of the requisite satisfaction to the effect that the assessee concealed his income to the extent of the perquisite of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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