TMI Blog2010 (11) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... holder, or guardian filing return on his behalf is not aware about correct income or investment liable to be taxed, as claimed in the present case, then a disorderly condition is likely to emerge where tax payers will be prompted to file untrue return through their agent, power of attorney holder or guardian without there being any accountability of any one. Revised Return - return filed under section 139(5) alone can be said to be a revised return. Since time limit for filing return under section 139(5) had expired on 31-3-08 the return filed on 10-6-08 cannot be validly called a revised return. - Voluntary Discloser - The return filed on 10-6-2008 cannot be said to be voluntary. Primarily, such return is not valid return under section 139(5) and at best it can be treated as an information under the signature of the assessee submitted to the department. Even such information cannot be said to be voluntary because it was submitted when assessee was served notice under section 142(1) and also a letter dated 12-5-2008. Satisfactory Explanation u/s 273 - The explanation furnished by the assessee before the Assessing Officer in assessment proceedings as well as in penalty proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the CIT(A) so as to confirm the penalty under section 271(1)( c ) are not admitted by the appellant in so far as the same are contrary to the facts on record or prejudicial to the appellant. 2. The facts of the case are that assessee is earning income from interest and share from partnership firm. He filed return of income on30-11-2006 showing total income at Rs. 3,60,800. It was processed under section 143(1). In this return assessee had shown interest income of Rs. 129 only. Subsequently the Assessing Officer received information from Bank of Baroda as a part of routine annual information return (AIR in short) filed by the bank for Financial Year 2005-06 wherein it was found that assessee had received interest income of Rs. 4,46,379 during this year. The Assessing Officer had also picked up the case for scrutiny assessment by issuing notices under section 143(2) on26-6-2007. Further notice under section 142(1) was issued on7-4-2008. On the basis of annual information return received from Bank of Baroda, the Assessing Officer issued a show-cause notice to the assessee on12-5-2008 whose relevant part is reproduced below : .. This is in continuation to this office notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24-3-2006 27,270 Thus, there is interest received of Rs. 4,46,379 which has not been offered for taxation. You are hereby asked to show cause as to why the said income should not be brought to tax .. Also the assessee was requested to show cause the following vide notice under section 142 ( 1 ) dated 12-5-2008. ( 2 ) . . . The information received and counter verified with Bank of Baroda also reveals an investment of Rs. 22,79,000 infixed deposits with the bank of Baroda. The said investment is not reflected in the return of income filed. Kindly show cause as to why the same should not be added to your income as unexplained investment .. . After receiving this notice the assessee furnished a reply to the Assessing Officer on 10-6-2008 which for the sake of convenience is reproduced as under :- To The Income-tax Officer, Ward 11(3), Ahmedabad. Dear Sir, Ref: No. Wd 11(3)/C14291)/KAS-83/2008-09 dated12-5-2008 Sub: Assessment proceeding for Asst. Year 2006-07 Please refer to the above. In this connection, we have to state as under :- That my father is a senior citizen of the age of about 70 years and all his financial trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to avoid litigation and to co-operate the department, we are surrendering an amount of Rs. 22,78,000 for Asst. Year 2006-07 as income. We are surrendering the above income i.e. Rs. 4,73,305 on a bona fide belief that no penal action would be taken against us and looking to the age and our object to co-operate the department, no penalty would be leviable. It is respectfully submitted that the assessee is a senior citizen and paying taxes and filing returns of income for last 35/40 years and there are no dues in the name of assessee in the Income-tax Department. The assessee is hereby surrendering the income as above to buy mental peace and to co-operate department and to avoid litigation. The assessee has already paid the tax of Rs. 11,54,700 due after considering the above surrender of the income on 4-6-2008 vide challan No. 00007 with Bank of Baroda BSR code 0200327. The copy of receipt of tax paid is enclosed herewith. We are also enclosing herewith the revised return for the year after considering the above income surrendered and also the claim of TDS deducted by payer and taxes paid as above along with the statement of total income, original TDS certificates and proof o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee also claimed this return filed on 10-6-2008 as revised return. The Assessing Officer in the assessment order passed on 9-7-2008 did not accept the return as revised return on the ground that it was filed beyond statutory time-limit prescribed under section 139 of the Act. Further he held that return so filed is not voluntary as the department has already detected the concealment. Relying on the decision of Hon ble Kerala High Court in Indian Cloth Depot v. CIT [1988] 173 ITR 330, of Karnataka High Court in the case of CIT v. Sudharshan Silks and Sarees [2003] 253 ITR 145 and that of the Tribunal in the case of Smt. Neetaben Tribhavandas Patel v. ITO 88 ITD 202, the Assessing Officer proposed an addition of unaccounted interest income of Rs. 4,73,305 and the undisclosed investment in FD of Rs. 22,78,000. He also initiated penalty proceedings under section 271(1)( c ). The assessment order so framed including therein the investment in FD and interest income thereon was not contested. During the course of penalty proceedings the assessee furnished reply dated9-1-2009 which reads as under : . That assessee is a senior citizen of the age of about 70 years and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee hereby plead that no penalty under the act should be levied .. The assessee also relied on following judgments:- CIT v. Nuruddin Brothers [1990] 185 ITR 481 (Cal) Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 CIT v. S.I. Paripushpam [2001] 249 ITR 550 (Mad) Sahinder Singh Bros. v. CIT [1980] 121 ITR 834 (P H) Gumani Ram Siri Ram s case ( 1971 ) 85 ITR 67,69 ( Punj.-) CIT v. Anwar Ali [ 1970 ] 76 ITR 696 4. The Assessing Officer, however, did not agree with the contention of assessee that disclosure is voluntary and was to buy peace. According to him concealment has been detected by the department and, therefore, it is a fit case for levy of penalty. The Assessing Officer accordingly levied penalty of Rs. 9,31,000 100 per cent of the tax sought to be evaded. The ld. CIT(A) confirmed the levy of penalty by holding that - (1) On the date of filing of original on30-11-2006, the assessee was not so seriously ill or critical. He was discharged from hospital on6-3-2006. (2) Interest income was credited in the account of assessee on various dates and TDS was deducted on payment of such interest. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise appear normal. No evidence of subdural, extradural or intraparenchymal haemorrhage is seen. Bony skull vault appears normal. To be correlated. The original return of income was prepared by assessee s son who did not know about the bank deposits. It was known to him after receipt of query letter from the Assessing Officer. The details were collected from the bank and revised computation of income was submitted to the Assessing Officer. Interest income was not received but only credited in the bank and, therefore, son was actually not knowing. ( ii ) Merely receiving information from Bank of Baroda in the annual information return does not amount to any discovery of undisclosed income. The Assessing Officer cannot form any prima facie satisfaction as to the said income whether it was undisclosed or not. ( iii ) Since assessee was almost not knowing what was filed in the original return he could not be charged for any contumacious conduct. ( iv ) Assessee is not maintaining any books of account and no personal balance sheet is prepared therefore, son could not know the actual financial position of the assessee. The son only considered the income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties are discussed as under :- I. The first issue is whether assessee can be exonerated from responsibility of declaration of interest income and investment in FDR in the return filed on 30-11-2006, signed by his son, Shri Hemu Shah. As per undisputed facts assessee had made investment of unaccounted money in the Bank of Baroda amounting to Rs. 22,78,000 somewhere in April/May, 2005 (exact date of deposit is not informed to us) and had earned interest income thereon which are credited by the Bank of Baroda in the savings account of the assessee and TDS was made thereon as per details given by the ld. CIT(A) on pages, 12,13 14 of the impugned order. The assessee submits that he was ill, hospitalized for couple of days in March, 2006. He had to undergo CT scan of the brain, but it was in September, 2008. However, the assessee continued to enjoy share income from partnership firm and he attended all other necessary family duties and business. It was not a case that assessee was not able to communicate with any of his family member including his son or it is not a case where son of the assessee has certified or filed an affidavit that return of income on behalf of assessee was file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty, as it is not proved that he is not aware as to what power of attorney holder is filing. If an assessee is exempted from levy of penalty solely on the ground that his agent, power of attorney holder, or guardian filing return on his behalf is not aware about correct income or investment liable to be taxed, as claimed in the present case, then a disorderly condition is likely to emerge where tax payers will be prompted to file untrue return through their agent, power of attorney holder or guardian without there being any accountability of any one. Basic structure of tax-system will shake which requires an assessee to declare true and correct income in the return. Therefore, even if return of income is filed by agent, or power of attorney holder or guardian, the assessee has to bear the consequences of an untrue return, unless there are other satisfactory reasons. Our view also is supported by the decision of Hon ble Karnataka High Court in Master Sunil R.Kalrao (2007) 292 ITR 86 wherein Hon. Court observed if the view that since the beneficiary himself does not file the return, he would not come within the ambit of the expression his income as appearing in section 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d intimated to the assessee. Thus there are ample narrations in the order passed by the Assessing Officer clearly showing the satisfaction of the Assessing Officer that assessee has concealed the particulars of income or furnished inaccurate particulars of income. Therefore, the question whether the Assessing Officer had arrived at a satisfaction on12-5-08 when he issued show cause notice to the assessee is not relevant. One has to see the satisfaction in the assessment order and not prior to it. Prior to passing of assessment order is the stage of enquiry and investigation. At that stage the Assessing Officer may have, satisfaction or may not have satisfaction about concealment of income made by the assessee. It is only the assessment order which is crucial in deciding about the satisfaction arrived at by the Assessing Officer. Further, the provisions of section 271(1B) inserted by Finance Act, 2008 with retrospective effect from 1-4-1989 takes care of such anomalies where Assessing Officer does not record satisfaction in clear words but make addition to the total income. But in the present case there are clear and specific recordings of satisfaction about concealment committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed return was filed disclosing higher income. Held that assessee did not act voluntarily and bona fide in filing the revised return and offering additional income. ( ii ) CIT v. A. Sreenivasa Pai [2000] 242 ITR 29 (Ker) -revised return was filed after books of account had been impounded for scrutiny. Hon. Kerala High Court held that a return filed under section 139(5) can be held to be revised, if ( a ) omission or wrong statement that might have occurred or crept in such omission or wrong statement must be bona fide . It must have been discovered by the assessee himself and, 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). SLP against this decision filed by the assessee was dismissed by Hon. Supreme Court in A. Sreenivasa Pai v. CIT (SLP C No. 5462 of 2000). ( iii ) Biland Ram Hargan Dass v. CIT [1988] 171 ITR 390 (All.) wherein revised return was filed after detection of concealed income in the search then surrender of income in the revised return would not be volunta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271 ( 1 )( c ) of the Act may not be attracted. But, for that purpose, the revised return itself must be within the correct ambit and scope of section 139 ( 5 ) . In the present case, no doubt, the discovery of the omission or wrong statement was made by the assessee. That by itself is not sufficient to bring the revised return within the ambit of section 139 ( 5 ) . The further 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. The assessee in this case should not give any particular basis for the original returns. The contention of the assessee that he had no accounts notwithstanding the admitted fact that he had incomes in lakhs of rupees was rightly rejected by the Tribunal. In the circumstances, the omissions or wrong statements in the original returns, as admitted by the assessee, could not be stated to be, by any standard of evaluation of evidence or material on record, inadvertent or bona fide omission or mistake. That being so, the revised returns were not really within the correct ambit and scope of section 139 ( 5 ) of the Act so as to allow immunity to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he son as power of attorney holder then it is not possible to believe that he had not enquired about various interest income earned by the assessee including the one from Bank of Baroda. Our view is strengthened by the fact that interest income earned from another savings bank account, amounting to Rs. 129 was worked out and declared in the return filed on 30-11-2006. Finally, there was ample time with the assessee from 30-11-2006 to 31-3-08 to find out as to what has been declared in the return of income and what has not been and to correct the return originally filed after declaring the investment and interest thereon. In such circumstances, there could have been a case of holding that declaration was voluntary but not now after the issue of show cause notice by the Assessing Officer on the basis of definite information. Accordingly, we are of the view that there was a mens rea involved in not declaring the investment and interest income therefrom in the original return filed on 30-11-06. VI. The next issue is whether assessee has disclosed all the material facts in the return filed on 30-11-06? In our considered view No. It is because investment in the bank and interest earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently or wilfully or neglectfully concealed the income. The assessee s agreeing to the addition of the amount by itself did not establish fraud or wilful neglect without something more. Accordingly the penalty was cancelled. Thus in this case, department did not have in its possession any material other than assessee agreeing to the addition and secondly this case pertained to Asst. Year 1974-75. Thereafter major amendment has taken place in the law w.e.f. 1-4-1975 by way of insertion of explanation to section 271(1)( c ). There is no requirement of Assessing Officer establishing any fraud or wilful neglect any more. This authority is also of no help to the assessee. ( iv ) Sahinder Singh Bros. v. CIT ( supra )- In this case assessee has agreed to an addition to total income for assessment purposes and there was no independent evidence that assessee has concealed the income. It was held byHon. Court that penalty provisions in Income-tax act is quasi criminal in nature and, therefore, penalty provisions should be strictly construed. There should be clear finding by the competent authority after enquiries that a definite amount has been concealed by the assessee in the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment in FDs and interest earned thereon was bona fide . For an explanation to be satisfactory it has to be shown that every bit of information relevant to the explanation and in possession of the assessee has been disclosed during assessment proceedings. Secondly, circumstances surrounding the explanation must show that what is stated in the explanation could be reasonably accepted as happened. In the present case it is not shown that power of attorney holder was not aware about the deposits in the bank and interest earned thereon. Secondly it is not shown that the bank in fact has not communicated about the deduction of tax to the assessee or to the son of the assessee. Thirdly, the assessee has been actively involved in partnership firm earning share income therefrom. It cannot be said that he is not active in financial matter and, therefore, he was unable to communicate about the deposits in the bank and interest earned therefrom. Fourthly the assessee did not give any reason why only the bank interest of Rs. 129 was declared and not the major interest earned from undisclosed investment. Finally it is not explained as to why assessee chose to be silent between 30-11-2006 to 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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