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ITO, Ward-3 (1) , Pune Versus M/s. Talwalkar Bhalerao and Mate, Pune

2016 (2) TMI 347 - ITAT PUNE

Penalty u/s.271(1)(c) - undisclosed income - Held that:- The assessee, in the instant case, has offered the undisclosed income of ₹ 60 lakhs in A.Y. 1991-92 and 1994-95 on the basis of sale of flats during those years and the assessee has given a note in the return filed for the impugned assessment year giving reasons for not declaring the same in this assessment year. It is now accepted proposition that on-money has to be brought to tax only in the year of sale of flats. Therefore, merely .....

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er of the CIT(A). - Decided in favour of assessee - ITA No.1247/PN/2014 - Dated:- 13-1-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Nikhil Pathak For The Respondent : Shri Hintendra Ninawe ORDER PER R.K. PANDA, AM : This appeal filed by the Revenue is directed against the order dated 29-01-2014 of the CIT(A)-II, Pune relating to Assessment Year 1990-91. 2. Deletion of penalty of ₹ 48,60,000/- by the CIT(A) levied by the AO u/s.271(1)(c) of the I.T. Act is t .....

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the statement recorded u/s.132(4) one of the partners Shri P.S.Talwalkar had declared an amount of ₹ 60 lakhs as undisclosed income for the A.Y. 1990-91 on account of extra money received which was not disclosed in the books of account. However, in the return filed the assessee had not disclosed such on-money but such amount was declared in the A.Y. 1991-92 and 1994-95. The assessee in his return for A.Y. 1990-91 had given the following note : The partner has declared a sum of ₹ 60 .....

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/-. In the said return the AO apart from making other additions/disallowances made addition of ₹ 60 lakhs being the amount declared u/s.132(4) which was not offered by the assessee for taxation. 5. The assessee preferred an appeal against this addition but without any success. The assessee preferred further appeal before the Tribunal in the quantum proceedings and the Tribunal also dismissed the appeal filed by the assessee. Subsequently the AO initiated penalty proceedings u/s.271(1)(c) o .....

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e brought on record in correct and right perspective. Subsequently, the CIT(A) vide order dated 29-01-2014 deleted the penalty levied by the AO. While doing so, he noted that the assessee in the instant case has filed the return of income and made disclosure of the on-money received in the statement of account submitted with the return of income. Though the said receipts were added to the taxable income in subsequent years due to accounting system followed the assessee had appended a note mentio .....

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by the AO. 7. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us with the following grounds : (1) The Learned Commissioner of Income-tax (Appeals) erred in deleting the penalty u/s 271 (1)(c) without examining the facts & evidences available on record and brought out by the Assessing Officer in the penalty order in support of levy of penalty u/s 271 (1)(c) of the Act. (2) The Learned Commissioner of Income-tax (Appeals) erred in not appreciating that the assessee had .....

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he method of accounting amounts to concealing the particulars of income. (4) The appellant craves leave to add, alter or amend any or all the grounds of appeal. 8. The Ld. Counsel for the assessee heavily relied on the order of the CIT(A). He submitted that on the date of search on 31-01-1990 the financial year order was yet to be completed. Referring to the copy of the remand report of the AO, a copy of which is placed at pages 101 to 105 of the paper book, the Ld. Counsel for the assessee drew .....

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iling the return for A.Y. 90-91 did not declare the undisclosed income as stated in the statement recorded u/s.132(4). However, the assessee has offered the same in his returns filed for A.Yrs. 91-92 and 94-95 and those returns were filed prior to the completion of the assessment. He submitted that the AO in the assessment completed has added the amount of ₹ 60 lakhs which has been confirmed by the Tribunal also. The AO, thereafter levied penalty @150% on the tax sought to be evaded which .....

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to the copy of the assessment order for 91-92, a copy of which is placed at pages 96 to 99 of the paper book, he submitted that the AO in the said order has clearly mentioned that the assessee has declared an amount of ₹ 34,55,600/- as income on proportionate basis out of extra unaccounted collection of ₹ 60 lakhs from the row house purchasers. 11. Referring to the decision of the Hon ble Bombay High Court in the case of CIT Vs. Karda Constructions Pvt. Ltd. vide ITA No.1960/2012 or .....

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e provisions of Explanation 5 as well as Explanation 5A to section 271(1)(c) of the Act and submitted that Explanation 5A was inserted by the Finance Act, 2007 w.e.f. 01-06-2006 and speaks of any income based on any entry in books of accounts or other documents or transactions and the assessee claimed that such entry in the books of account or other documents or transactions represents his income, (wholly or in part) for any previous year. However, as per Explanation 5, when during the course of .....

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o section 271(1)(c) of the I.T. Act, 1961. 12. So far as invoking of Explanation 1 to provisions of section 271(1)(c) of the Act is concerned, he submitted that the assessee has already given a bonafide reason in the return of income as well as during the course of assessment proceedings. He submitted that although the quantum addition has been confirmed by the Tribunal, however, the assessee can make a new plea at the time of penalty proceedings which are separate and distinct. Since the Hon bl .....

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r hand heavily relied on the order of the AO. He submitted that the assessee while filing the return of income has changed the method of accounting by shifting the work-in-progress method to project completion method which is only for deferring of the tax liability. He submitted that the assessee in his statement recorded u/s.132(4) had categorically stated that the undisclosed income of ₹ 60 lakhs will be offered to tax in the A.Y. 90-91. Therefore, the assessee now cannot defer the payme .....

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Ld. Counsel for the assessee in his rejoinder submitted that change of method only affects the accounted profit and not to unaccounted income. Referring to page 87 of the paper book which is the assessment order for A.Y. 90-91 the Ld. Counsel for the assessee drew the attention of the Bench to Para 3 of the assessment order and submitted that the assessee has declared loss of ₹ 13,21,990/-. The AO completed the assessment by disregarding the loss and determined the profit at ₹ 13,12, .....

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322 ITR 158 he submitted that the Hon ble Supreme Court in the said decision has held that mere making of a claim which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. The said claim made in the return cannot amount to furnishing of inaccurate particulars. He submitted that in any way when two views are possible the view which is favourable to the assessee has to adopted. For the above proposition he relied on t .....

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s of which are already given at Para 8 of this order. The assessee in his statement recorded u/s.132(4) offered additional income of ₹ 60 lakhs for the A.Y. 90-91. However, while filing the return of income, the assessee did not offer the same to tax for the impugned assessment year but appended a note stating that the income so declared will be considered in the income to be computed for A.Y. 91-92 since the income in the case of the firm is to be ascertained after the completion of the p .....

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nd the CIT(A) again deleted penalty for which the Revenue is in appeal before us. 18. It is the case of the Revenue that the assessee in his statement recorded u/s.132(4) had admitted additional income of ₹ 60 lakhs for the impugned assessment year and therefore there is no rationale in deferring the same to A.Yrs. 1991-92 and 1994-95. The assessee which was following work-in-progress method cannot switch over to project completion method just to defer the tax liability to escape from the .....

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g was found from the premises of the assessee during the search. It is also the submission of the Ld. Counsel for the assessee that the assessee has given a bonafide reason and not declared the additional income in A.Y. 1990-91 and declared the same in subsequent years when the flats were sold. It is the alternate contention of the assessee that since evidence of on-money relating to this assessment year was only ₹ 7,69,300/-, therefore, penalty at best can be levied on this amount for the .....

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/2012 order dated 25-02- 2013 has held that on-money, which was part of sale consideration of flats, has to be taxed in the year in which the assessee has recorded the sale of flats. The relevant observation of the Hon ble High Court reads as under : P.C. : In this appeal by the revenue for assessment year 2009-10 following question of law has been framed for our consideration. Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the additio .....

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fact recorded by the CIT(A) that receipt of ₹ 71,67,000/- was part of the sale consideration of the flats sold by the respondent assessee and the same has to be taxed in the year in which the assessee has recorded the sale of flats. The objection of the revenue is that amount of ₹ 71,68,000/- found in cash has to be taxed in the year in which cash was received by the respondent assessee and not in the year the sale of the flats took place. The Tribunal records a fact that there is n .....

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of the revenue before the Tribunal was dismissed. 3. Since the decision of the Tribunal is essentially based on a concurrent finding of fact, we see no reason to entertain the proposed question of law. 4. Accordingly, the appeal is dismissed with no order as to costs. 20. Further, it is also a fact that no money, bullion, jewellery or any other valuable article was found during the course of search. No cash was also found during the course of search, a statement made by the Ld. Counsel for the .....

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e Court in the case of Reliance Petroproducts Pvt. Ltd. (Supra) has held that a mere making of a claim which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. The said claim made in the return cannot amount to furnishing of inaccurate particulars. The relevant observation of Hon ble Supreme Court at pages 163 to 166 read as under : A glance at this provision would suggest that in order to be covered, there has to b .....

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l or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in the Section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot .....

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ination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In Commissioner of Income Tax, Delhi Vs. Atul Mohan Bindal [2009(9) SCC 589], where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India Vs. Dharamendra Textile .....

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that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. [2007(6) SCC 329], this Court explained the terms "concealment of income" and "furnishing inaccurate particulars". The Court went on to hold therein that in order to attract the penalty under Section 271(1)(c), mens rea was necessary, as a .....

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ars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to .....

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Section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of Section 271(1)(c) read with Explanations indicated with the said Section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, willful concealment is not an essential ingredient for attracting civi .....

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Mumbai & Anr. (cited supra). However, it must be pointed out that in Union of India Vs. Dharamendra Textile Processors (cited supra), no fault was found with the reasoning in the decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra), where the Court explained the meaning of the terms "conceal" and inaccurate". It was only the ultimate inference in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra) .....

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ccurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript". We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assess .....

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