GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (5) TMI 815 - ITAT DELHI

2015 (5) TMI 815 - ITAT DELHI - TMI - Penalty u/s 271(1)(c) - Held that:- From the aforesaid observation of the AO, it is clear that whatever was added that was the result of investigation carried out by the Investigation Wing of the Department. However, the AO during the course of regular assessment proceedings u/s 143(3) of the Act was fully satisfied with the explanation of the assessee and no addition was made in spite of the fact that all the information relating to increase in share capita .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d that the AO levied the penalty u/s 271(1)(c) of the Act. However, for levying the penalty in search cases the Finance Act, 2007 inserted section 271AAA of the Act w.e.f 01.04.2007 which clearly states that no penalty under the provisions of clause (c) of Sub-section (1) of section 271 t shall be imposed upon the assessee in respect of the undisclosed income referred to in Sub-section (1) i.e. the undisclosed income found after the search, the word “shall” used in Sub-section (3) to section 271 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

/s 271(1)(c) of the Act was not justified and the ld. CIT(A) wrongly upheld the penalty levied by the AO - Decided in favour of assesse. - ITA No. 1324/Del/2013, ITA No. 1325/Del/2013, ITA No. 1326/Del/2013 , ITA No. 1327/Del/2013 , ITA No. 1328/Del/2013 - Dated:- 22-5-2015 - Sh. G. C. Gupta and Sh. N. K. Saini, JJ. For the Appellant : Sh. K. Sampat & V. Raj Kumar, Advs. For the Respondent : Sh. P. Dam Kanunjna, Sr. DR ORDER Per N. K. Saini, AM: These five appeals by the assessee are direc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

gether to so these are being disposed of by this common order for the sake of convenience and brevity. 2. First we will deal with the appeal in ITA No. 1324/Del/2013 for the assessment year 2003-04. The only effective ground raised in this appeal reads as under: That on the facts and in the circumstances of the case and in law, the authorities below erred in holding that the Appellant had furnished inaccurate particulars of income, thereby imposing penalty u/s 271(1)(c) of the Act in a sum of &# .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o were found not existing at the given addresses. It was therefore implied that those entities were made by the group on paper only to introduce its unaccounted income generated from tea business as bogus share capital. The assessee on confronting surrendered the amounts involved vide letter dated 10.05.2010, furnished during the course of assessment proceedings, enclosing therein a list of the entities. The AO however proceeded to levy the penalty u/s 271(1)(c) of the Act holding that there was .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of ₹ 22,96,875/-. 4. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that it had voluntarily surrendered ₹ 62,50,000/- on account of share capital which was accepted by the AO while passing the order u/s 153A(1)(b) of the Act and that during the assessment as well as the penalty proceedings all relevant evidences/explanation were submitted including the identity proof, PAN, copy of income tax return, MOA, COI form no. 18 & 32 etc. It was further s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nder and non-filing of appeal against addition could not be made the basis of imposing the penalty. The other submissions of the assessee before the ld. CIT(A) as incorporated in para 5.2 of the impugned order are reproduced verbatim as under: 5.2. It was further submitted as under: Further confirmation of all the applicants have submitted with other evidences in which they confirmed that they have invested in our shares. As well as duly sworn and notarized affidavit from the applicant deposing .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er been controverted nor disproved by the AO, then no further interference, is called for. It is undisputed that all the share applicants has confirmed their investment in the share capital of the appellant company, had given their PAN, were assessed to tax, relied on CIT Vs Makhni and Tyagi (P) Ltd. Reported in 267 ITR 433 (2001). Department has also accepted in assessment order itself that "the details regarding introduction of share application were given through income tax return and as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. iv) The affidavit of the subscribers are filed indicating their full address, details of deposits made with the appellant and sources where from money was obtained to make the deposits. Copies of bank accounts were furnished. These affidavits were notarized. There was no ground for disbelieving the contents of the affidavits. v) Subscribers were companies incorporated with the Registrar of Companies. Proper inquiries would have revealed the true facts of the case. The appellant cannot be fault .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

source of capital introduced and also failed to produce the directors of such companies." Whereas we have submitted affidavits from the directors of all companies in which they have confirmed that they have invested in shares of our companies Not only affidavits but confirmations from all the share applicants are also submitted. Further the transactions are related to 6-7 years ago therefore it would take so much time to reconstitute all the things. But no sufficient time has been provided .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mentioned in the order whether any notice/summons were issued. In this case assessee cannot be held responsible for non production of directors. Further there was no legal obligation on the assessee to produce director of other representative of the applicant companies before the AO, as held in the following case: In the case of CIT vs. Victor Electronics Ltd. ( supra) ( 2010) 42 DTR (Del) 152, it has been clearly laid down by the Hon'ble Delhi High Court that "There is no obligation o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by itself is not sufficient for the AO to reject assessee's case when the assessee has furnished all documents relating to share applicants, such as their permanent account no., details of Income- tax assessment, registration of companies under companies act and bank details." Similar circumstances exist in the case of Income Tax Officer, ward 11(3), New Delhi. Vs. M/s Francotyp Postalia India Pvt. Ltd., ITA No. 671/Del/2010 assessment year 2006-07 where decision of the CIT(A) is uphold .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se or untrue by the AO. All the applicants are assessed by Income tax department for which assessment orders are issued by income tax authorities. Whether this is not the sufficient evidence of existence of these applicants. The AO did not make any verification in this regard either form the internal record of the department or from the concerned bank. If he so wanted, he could have called for the IT returns of the share applicants to ascertain whether the investment made in our company was refl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

clined that the payment of share application money was not made from the bank account of the applicant companies. We have also filed name and address of directors of applicant companies. Admittedly, copies of application for allotment of shares were also provided to the AO. AO has not declined that the share applications were not signed on behalf of the applicant companies and were forged documents or the shares were not actually allotted to the companies. We have filed copies of resolutions pas .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ification, how AO can decide that these companies are not in existence. The AO has merely relied upon the Investigation wing without referring to the evidences or materials on the basis of which it could be said that the companies are bogus. The AO has not made any enquiry from the respective AO assessing those share applicants. The AO has also not made any enquiry from the office of registrar. The AO has also not made any enquiry from the office of ROC about existence of these companies and the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

documents in support of the genuineness of the share application money received by the assessee. In other decision of the Delhi High Court in case of CIT vs. Victor Electrodes Ltd. in ITA No. 586 of 2010 dated 12th May 2010 [reported at (2010) 42 DTR (Del) 157- Ed.] similar view has been taken by the Hon'ble Delhi High Court that once the details of IT returns, bank statements etc. with regard to the various share applicants have been provided, the mere fact that parties were not produced be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vided various opportunities through remand proceedings to carry out any inquires or make verifications with regard to PAN and other details of the share applicants. Through letter dated 22nd Feb., 2010 the AO was specifically asked to make any inquires required and issue any summons to different parties for controverting the documents submitted by the Authorised Representative of the appellant regarding the identity and genuineness of the transaction. The relevant portion of the letter of the of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by the AO to summon the director of the applicant companies. The addresses of these companies are available on the share application forms, memorandum and articles of association and their IT returns. If the AO had any doubt identity of the share applicants, he could have summoned the directors of the applicant companies. No such attempt was, however, made by him. Similarly in the case of SOPHIA FINANCE LIMITED it has been held that if the shareholders are identified and it is established that t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ques/bank draft only. A perusal of the bank statement of the investor company makes it clear that it had made many such transaction during the year under assessment and that this was not the only transactions that had taken place during the year. With reference to creditworthiness it is submitted that the assessee company was not required to prove the source as has been held in the case of Daulatram Rawatmull 1972 CTR (SC) 411 (1973) 87 ITR 349 (SC). It is further submitted that the applicabilit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

from offer of surrender. We have surrendered this amount only for peace of mind with the condition of no penalty therefore such addition cannot be a basis to treat us having concealed particulars of income or having furnished inaccurate particulars of income. It is quite wrong that there was wrong intention because the entire share capital stood disclosed to the department as having been entered in the. regular account books maintained by our company prior to the date of search on 04.09.2008, un .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

substantiate our fact, we submit as follows: There is no concealment of Income In order to levy the penalty u/s 271(1)(c) of the Act, following conditions should be satisfied. If any person has a) Concealed the particulars of his income, or b) Furnished inaccurate particulars of his income c) Concealed the particulars of fringe benefits, or d) Furnished inaccurate particulars of such fringe benefits. But in our case: a) There was no any concealment of income b) We have not furnished any inaccura .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ompleting assessment, surrender was offered only to buy peace of mind and with the precondition that we will not be liable for any panel action in respect of the same. It is also amply clear from our stand which we took as per mutual agreement that we did not file any appeal before any appellate authority against the addition made as we were under bonafide belief that no penalty proceedings shall be initiated as mutually agreed and discussed with regard to the surrender made. We have paid the fu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

T authorities. In the present case we have not concealed the amount of share capital and proper details were given to income tax department through income tax return and as well as Registrar of companies. All the details regarding share capital were also produced during the assessment proceedings and penalty proceedings. We have surrendered during assessment proceedings despite of the fact that we have all documentary evidences of share capital just to purchase peace with a condition that no pen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d every detail of share applicants and made no any doubt regarding existence of share applicants. Further it is no worthwhile to mention that our books of accounts are also scrutinized u/s 143(3) for the AY 2004-05 and 2005-06. All the details regarding share capital of the company are duly verified by Ld. Income Tax Authorities in each year. Therefore there is no question arises regarding concealment of income. 5. The assessee also contended that the surrender was on agreed basis and was condit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y and our resources towards productive work and to make amicable settlement with the department that is why we offered to surrender the amount as income subject to condition that offer is by way of voluntarily disclosure without admitting any concealment and subject to no initiation of penalty. 6. The ld. CIT(A) after considering the submissions of the assessee observed that the penalty u/s 271(1)(c) of the Act is to be levied if the assessee has concealed particulars of income or had furnished .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to light only after a search was conducted on the assessee group of companies and consequent to which proceedings were initiated u/s 153A of the Act. The ld. CIT(A) pointed out that as per the provisions of section 153A(1) of the Act, once the assessee is subjected to the process of section 132(1) of the Act, the AO has to assess the total income of the assessee and while determining the same, he has to consider both the disclosed and the undisclosed income. The ld. CIT(A) observed that there i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessee on the basis of an agreed surrender, what was germane was the facts of the case leading to the conclusion that the assessee had consciously acted to conceal and file inaccurate particulars of its income. The ld. CIT(A) observed that the assessee was confronted with the findings of the Investigation Wing during the assessment proceedings and requiring him to file full evidence of the additions to its share capital and to produce the directors of the investor company with affidavits for ver .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nies who had invested in its shares, during the subsequent proceedings that led to the assessee coming forward to accept the introduction of its unaccounted money as share capital through these entities. The ld. CIT(A) also observed that the surrender letter was filed by the assessee consequent to further query by the AO. So, there was no requirement of further investigation by the AO as challenged by the assessee, when the findings of the Investigation Wing were available and assessee suo-moto .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he assessment u/s 143(3) of the Act. The ld. Counsel for the assessee referred to the page no. 8 of the penalty order dated 28.03.2011 and submitted that the assessee proved the identity and the existence of the company by furnishing the following documents: Proof of filing of income tax return in the shape of ITR Application for investment in shares. Proof of allotment of shares made by the assessee company in shape of Form No. 2 and receipt of ROC. Affidavit for investing in equity shares of t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of IT returns, copy of receipt along with date. It was stated that the assessee furnished all the requisite information and discharged the onus cast upon it. It was further stated that the payments were received by account payee cheques and that the bank account statement of the investor company made it clear that many such transactions were made during the year and it was not the only transaction that had taken place during the year, therefore, only on the basis that the assessee surrendered t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enalty was not leviable u/s 271(1)(c) of the Act because the search took place on 04.09.2008 and that the penalty, if any was to be levied, it was leviable u/s 271AAA of the Act. It was contended that in the instant case no penalty was leviable as per the provisions of Sub-section (2) of section 271AAA of the Act because the assessee substantiated the manner in which the amount on account of share capital was received and gave all the information during the course of assessment proceedings, ther .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fact that the assessee disclosed all the information relating to the increase in share capital i.e. the form of application for investment in shares, proof of allotment of shares in the shape of Form No. 2 and receipt of ROC, affidavit for investment in equity share of the assessee, copy of bank statement of the assessee as well as the investor, copy of memorandum of Association, copy of certificate of incorporation and proof of filing of the Income Tax Returns by the investor. Therefore, it ca .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ave produced a letter of surrender during the assessment proceedings. What more is pertinent to note that it was as a result of investigation carried out by the Department that the assessee was forced to furnish a letter of surrender by accepting that the share capitals introduced by him was his own unaccounted money given the colour of genuineness through various entities. It is simple that nobody will offer any amount for taxation unless it has been generated through unaccounted sources. 10. F .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oncealed any information or particulars from the department. It is well settled that penalty proceeding and assessment proceedings are two different and distinct proceedings. In such type of cases, there can be many reasons for making the surrender but the surrender itself is not a conclusive proof of concealment of income or furnishing of inaccurate particulars of income. In the present case, it is also noticed that the AO levied the penalty u/s 271(1)(c) of the Act. However, for levying the pe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

te of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i ) in the course of the search, in a statement under subsection (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii ) substantiates the manner in which the undisclosed income was derived; and (iii ) pays the tax, together with interest, if any, in respect of the undisclosed income. ( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version