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2015 (8) TMI 325 - ITAT HYDERABAD

2015 (8) TMI 325 - ITAT HYDERABAD - TMI - Penalty u/s 271(1)(c) - AO observed that since assessee has earned income which he should have declared in the return of income, but, did not do so, he is liable to be visited with penalty u/s 271(1)(c) in view of explanation 1 and 5A of section 271(1)(c) - assessee in the application made before the Settlement Commission had offered additional income - Held that:- there is nothing in assessment order to suggest that additional income assessed at the han .....

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ment by virtue of willful negligence or deliberate act by assessee. One more aspect which needs deliberation is, though in the penalty order, AO has in clear terms mentioned that imposition of penalty is for concealment of income and not furnishing of inaccurate particulars of income, but, ld. CIT(A) has observed that assessee has furnished inaccurate particulars of income.

From the aforesaid facts, it is clear that the departmental authorities are not sure as to which limb of the pen .....

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, though we fully agree with the principles laid down therein, however, they cannot be applied uniformly to all cases divorced from the facts on the basis of which such principle are decided. After careful analysis of the decisions, we are of the view that they will not apply to the facts of the present case. In aforesaid view of the matter, we are of the opinion that imposition of penalty under section 271(1)(c) in the facts of the present case is not justified. Accordingly, we delete the same. .....

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d identical, the same were clubbed and heard together, therefore, the same are being disposed of by way of this common order for the sake of convenience. 2. As facts are common in all these appeals, for the sake of brevity we will refer to the facts as involved in AY 2005-06 being ITA No. 526/Hyd/2014. Assessee an individual, at the relevant point of time, was working as Manager in JB Education Society. A search and seizure operation u/s 132 of the Act was conducted in case of JB Group of Instit .....

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ed in the original return filed on 02/01/2006. During the assessment proceeding, AO on the basis of information available with him found that assessee has moved an application before Settlement Commission wherein it has been stated that while working as Manager with JB Group of Institutions, he acted as consultant in getting students for being admitted and in the process he has collected excess fee over the prescribed amount without the knowledge of management. Therefore, he offered to disclose .....

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Income returned Income offered before the ITSC Revised total income 2004-05 1,16,276 0 0 2005-06 1,14,840 44,36,000 45,50,840 2006-07 1,16,890 2,87,60,000 2,88,76,890 2007-08 98,700 93,00,000 93,98,700 2008-09 2,07,500 2,59,32,500 2,61,40,000 2009-10 3,02,250 1,34,35,200 1,37,37,450 Total 9,56,456 8,18,63,700 8,27,03,880 3. On the basis of the income declared by assessee before the Settlement Commission, AO completed the assessment u/s 143(3) read with section 153A vide order dated 30/12/2011 by .....

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me offered by assessee before the Settlement Commission and no other additions have been made neither there can be furnishing of inaccurate particulars of income nor concealment of income. AO after going through the explanation of assessee, observed that though assessee before the Settlement Commission offered additional income, but, he did not offer the income so disclosed in the returns filed. AO observed that since assessee has earned income which he should have declared in the return of inco .....

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submitted that additional income was offered by assessee not only at the time of search and seizure operation when statement was recorded from him u/s 132(4), but, it was also declared in the application filed before the Settlement Commission and taxes were also paid. It was submitted, assessment order was also passed solely on the basis of the declaration made by assessee before the Settlement Commission. Therefore, there cannot be any concealment of income or misrepresentation of facts by asse .....

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nt Commission rejected application on the ground that unaccounted income disclosed in the application filed by assessee was not true and did not pertain to him. She further noted that in case of M/s JB Educational Society and M/s Joginapally BR Educational Society appeals were filed before ITAT challenging similar additions made. In course of hearing before ITAT, a sworn affidavit of Shri R. Kondal Rao, present assessee, was filed wherein he stated that the excess fees/capitation fees collected .....

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ty imposed u/s 271(1)(c) is valid as assessee has filed inaccurate particulars of income thereby concealed the income. Being aggrieved, assessee is before us. 5. Ld. AR more or less reiterating the submissions made before the departmental authorities submitted, from the stage of search and seizure operation itself, assessee had admitted excess fees collected by him from students as his additional income. In this context, he referred to the statement of assessee, a copy of which is in paper book. .....

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are entire income at his hands in application filed before the Settlement Commission and also paid taxes. Ld. AR referring to the order passed by the Settlement Commission submitted before us, while rejecting assessee s application, however, the Settlement Commission held that undisclosed declared by assessee do not pertain to him. Therefore, in this situation, it cannot be said that assessee has either furnished inaccurate particulars or concealed the particulars of income. Ld. AR submitted, th .....

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ibunal deleted the addition made at the hands of educational institutions since already the amount has been assessed at the hands of Sri R. Kondal Rao. Ld. AR submitted, in the aforesaid facts and circumstances, it cannot be said that assessee has concealed his income considering the fact that the departmental authorities themselves were not sure at whose hands income is to be assessed. Ld. AR referring to the decision of ITAT Hyderabad in case of Sun Infra Vs. ACIT, 30 ITR (Trib) 451 submitted, .....

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iled before the Settlement Commission, but, he nevertheless failed to offer the said additional income in the returns filed for AYs 2005-06 to 2009-10 in response to notice u/s 153A of the Act. Therefore, assessee having not made any voluntary disclosure of additional income and on the contrary having failed to disclose the income even though he has earned such income, the provisions of section 271(1)(c) are clearly attracted. He further submitted, since there is no voluntary disclosure by asses .....

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ties and perused the materials on record as well as the orders of revenue authorities. As can be seen from the materials on record, during the search and seizure operation, it was found that excess fees has been collected from admission of students without accounting for in the books of account of educational institutions. However, Shri R. Kondal Rao, present assessee, who was working as Manager of the Educational Institutions run by society filed an application before DDIT(Inv.) wherein he admi .....

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nal income in different assessment years and also paid taxes due thereon. However, the Settlement Commission rejected the application of assessee observing as under: "9 i) We find that at the time of search, seized documents No. JB/AA/1 to 10 were scrutinized thoroughly by the I.T. Department and it was found that this material established receipt of unaccounted capitation fees in cash. In fact, Shri Vamsidhar Rao admitted this position and offered an undisclosed income of ₹ 7.5 crore .....

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y stated in their statements that they were merely negotiating on behalf of Shri Bhaskar Rao and whatever unaccounted capitation fees was received in cash was handed over to Shri Bhaskar Rao. They have further admitted that even the quantum of unaccounted capitation fees was fixed in consultation with Shri J. Bhaskar Rao. We have noted that, at different points of time both during and after the search, Shri Bhaskar Rao, Shri Vamsidhar Rao and Shri J.K. Rao have confirmed the correctness not only .....

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ion of the ld. AR that the applicant had embezzled the funds which have been received by way of unaccounted capitation fees and applied it for charitable purposes. It is totally inconceivable that, for the sake of charity, any person in his right senses would take a risk which may invite serious criminal consequences. We find that all evidence including statements of various persons clearly establishes that the unaccounted income disclosed in the settlement application filed by the applicant did .....

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offered additional income in the application filed before the Settlement Commission, but, he failed to disclose it in the return of income filed. Ld. CIT(A) has also confirmed the imposition of penalty by observing that there is collusion between assessee and the management of the society to mislead the department. However, the Settlement Commission has made categorical observations that there being no material which could indicate that assessee embezzled funds of society, claim of assessee that .....

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horities themselves were not sure as to at whose hands income is to be assessed or whether the income actually belongs to assessee. Further even though, assessee offered additional income before the Settlement Commission, but, the Settlement Commission on appreciation of evidences available before it refused to accept assessees claim that additional income is pertaining to assessee. Therefore, when the departmental authorities are themselves not sure about the real owner of income and in fact wh .....

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ess/capitation fees collected was not handed over to the management and it is his income but on scrutiny of the said affidavit, as has been extracted in the order passed by Tribunal in ITA No. 29/Hyd/2013 and others dated 28/10/2013, it is very much clear that statements made in the affidavits are almost identical to the facts mentioned in the application filed before the Settlement Commission by assessee. No doubt, similar addition made in the hands of educational institutions were deleted by t .....

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tions. As stated herein before, there is nothing in assessment order to suggest that additional income assessed at the hands of assessee is as a result of any incriminating material. Neither at the stage of assessment nor at the time of penalty proceeding, AO has brought any material on record to show that additional income really belongs to assessee. Only because assessee offered additional income at his hand that will not automatically lead to the conclusion that assessee has concealed his inc .....

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