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Krishan Kumar Palta and Sandeep Kumar Palta Versus The Income Tax Officer, Ward 1 (1) , Chandigarh

2015 (8) TMI 1263 - ITAT CHANDIGARH

Penalty under section 271(1)(c) - natire of satisfaction - Held that:- The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing The scope of Section 27l(l)(c) has also been elaborately discussed in Union of India vs. Dharmendra Textile Processors (2008 (9) TMI 52 - SUPREME COURT) and CIT vs. Atul Mohan Bindal (2009 (8) TMI 44 - SU .....

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mmon order of the learned CIT (Appeals), Chandigarh dated 23.1.2009 relating to assessment year 2000-01. 2. The issue involved in these appeals is common and the appeals were heard together and are being disposed off by this common order for the sake of convenience. 3. Firstly, I will take up ITA No.243/Chd/2009. The assessee has challenged the action of the learned CIT (Appeals) in confirming the penalty of ₹ 3,30,000/- levied by the Assessing Officer under section 271(1)(c) of the Income .....

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i Lal Bajaj during the assessment year under consideration. During the course of inquiries, ADIT (Inv.) had recorded the statement of Shri Avinashi Lal Bajaj, who denied having made any gift but stated that only pay order was issued in lieu of cash received from Shri Krishan Kumar Palta i.e. the assessee. Consequently, notice under section 148 of the Act was issued on 4.3.2005 after recording reasons. In response to the said notice, the assessee filed written reply stating that the original retu .....

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e notice of the assessee the fact that Shri Avinashi Lal Bajaj in his statement before the ADIT (Inv.)-II has categorically stated that he has not made any gift but only pay order was given after receiving cash from the assessee. In other words, the assessee was specifically confronted with the above facts. The Assessing Officer also issued summons to Shri Avinashi Lal Bajaj on the address given in the affidavit, however, the same could not be served as Shri Avinashi Lal Bajaj was stated to be o .....

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d on 28.2.2006. In response to show cause notice issued under section 271(1)(c) of the Act, the assessee submitted written reply on 7.8.2006, which reads as under : "a) That the assessee received a gift for ₹ 1000000/- from Mr. Avinashi Lal Bajaj through payees account cheque during period 1.4.1999 to 31.3.2000 and credited in his bank account no. 1127 maintained with Punjab National Bank, Manimajra. The said gift has duly been reflected in personal balance sheet for the period under .....

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h any proper & effective opportunity to examine/cross examine the donor. That in his surrender letter of dated 20.02.2006 before the A.O., the assessee has clearly mentioned the fact of receiving gift from Mr. Avinashi Lai Bajaj. It has also been made clear in para 2 of the said surrender letter that since now the donor is co-operating in the income tax proceedings, therefore to avoid litigation and purchase peace ₹ 10 lac is being surrendered subject to penal action under the provisio .....

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the orders of the A.O. b) That only part of the surrender offer letter has been accepted. Its first part offering surrender of ₹ 10 lacs has been accepted and has taxed accordingly now its second part making the said surrender offer subject to no penal action under the provisions of Income Tax Act be considered with same spirit. Any offer must be accepted/rejected in full and not partly. c) That no satisfactory reasons have been recorded during the course of assessment either in respect o .....

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appeal against the orders and no satisfactory reasons have been recorded during the course of assessment either in respect of concealment of income or furnishing of inaccurate particulars of such income, it is therefore prayed that penalty proceedings initiated under the provisions of section 271(l)(c) of the income be dropped." 5. The Assessing Officer did not accept the above reply of the assessee for the following reasons : "a) The contention of assessee that he was not provided suf .....

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ntion of the assessee that the surrender was made in good faith and to avoid litigation and was subject to no penal action is not correct. The assessee choose to surrender only when after intensive inquiries it was established by the department that there was not a genuine gift, the entry of ₹ 10,00,000/-wasobtained after paying amount in cash to the said donor. The department had already reopened the case u/s 147 of the Income Tax Act, 1961 and the assessee was specifically confronted wit .....

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Supreme Court was that "whether High Court in a reference could interfere with the finding of a fact and transform the same into a question of law on the ground that there has been non-consideration of all relevant facts" The Hon'ble Supreme Court held that in preferring one view to another view of factual appreciation, the High court transgressed the limits of its jurisdiction under the income tax reference in answering the question of law. Further on facts the main additions made .....

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concealment of particulars of income are being initiated separately. The AO in his entire order u/s 143(3) has discussed this very concealment of income and has given clear finding and satisfaction with respect to the concealment of particulars of income which has been recorded in the assessment order." 6. In view of the above, the Assessing Officer held that the assessee has willfully concealed the particulars of income and has furnished inaccurate particulars in the relevant return. The A .....

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was satisfied that the assessee had willfully concealed the particulars of his income of ₹ 10 lacs and committed the default under section 271 (1) (c) of the Act. He, therefore, levied a penalty of ₹ 3,30,000/- under section 271(1)(c) of the Act. 7. On appeal, the learned CIT (Appeals) confirmed the impugned penalty, and hence the assessee is in appeal before the Tribunal. 8. I have heard Shri Rakesh Jain, learned counsel for the assessee and Shri D.S.Sidhu, learned D.R. at length a .....

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s not considered as gift. He relied upon the decision of Hon'ble Jurisdictional High Court in the case CIT Vs. Balbir Singh (2008) 304 ITR 125 (P&H). The learned counsel for the assessee further submitted that the Assessing Officer has not afforded any opportunity to the assessee to cross examine the donor Shri Avinashi Lal Bajaj on whose statement reliance was placed by the Assessing Officer. However, the learned counsel for the assessee submitted that in this case the assessee has prod .....

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der has been accepted. However, the later part that it is subject to no penal action, was not accepted. The learned counsel for the assessee also relied upon the decision of the I.T.A.T. Delhi Bench B , New Delhi in the case of Deepak Kumar Jain Vs. ITO in ITA No.2189/Del/2012 relating to assessment year 2002-03. The I.T.A.T., Delhi Bench vide its order dated 20.7.2012 deleted the penalty levied under section 271 (1) (c) of the Act holding that it is not the case of the Revenue that the document .....

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th return of income. The Assessing Officer did not accept the explanation on the ground that the assessee could not produce any documentary evidence with regard to his relationship with the persons from whom gifts have been received, nor could explain the purpose of such gifts. However, the Tribunal has cancelled the penalty stating that when the Revenue has not been able to find any fault in the documents submitted by the assessee, and, therefore, no penalty under section 271 (1) (c) of the Act .....

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he gift and creditworthiness of the donor. According to the learned D.R., the assessee failed on both the counts in spite of ample opportunities provided to him. He further submitted that the assessee has not made surrender in good faith. Instead, the assessee choose to surrender only when after intensive enquiries, it was established by the Department that there was not a genuine gift, the entry of ₹ 10 lacs was obtained after paying the amount in cash to the said donor. The assessee was .....

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following decisions : i) CIT Vs. Deep Chand (2011) 336 ITR 292 (P&H) ii) Mak Data P.Ltd. Vs. CIT (2013) 358 ITR 593 (SC) 10. In this case, the assessee claimed that he had received gift of ₹ 10 lacs from Shri Avinashi Lal Bajaj S/o Shri B.D.Bajaj, resident of House No.3046, Sector 20D, Chandigarh. During the course of enquiries made by the Investigation Wing, Shri Avinashi Lal Bajaj in his statement stated that he retired on 1.7.1996 from Public Health Department, U.T., Chandigarh and .....

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paid in lieu of cash received from alleged donee and he has not given any loan or gift to any person in India out of NRE Account No.1062 with Vijya Bank, Chandigarh. He further stated that Shri Ramesh Kumar (middle man) promised to helf in export business to USA and obtained draft/pay orders in different names and paid in cash immediately in lieu of the same. The Investigation Wing of the Revenue has also recorded the statement of the assessee on 30.12.2003 on oath. In his statement, the assess .....

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t to any person; only pay order has been given in lieu of cash. The Assessing Officer vide letter dated 9.1.2006 asked the assessee to prove the genuineness of the gift in question. IN response to the above query, the assessee vide his letter dated 20.2.2006 submitted as under : "1. That during the period relevant of the Act the Asst. Year 2000-01, I received a gift for ₹ 10 Lacs from Sh.Abhinashi Lal Bajaj S/o Sh.B.D.Bajaj Resident of House No.3046, Sector 20D, Chandigarh, through Pa .....

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the provisions of I-Tax Act." 11. From the above letter of the assessee, it is clear that the assessee surrendered ₹ 10 lacs as his income for the assessment year 2000-01 as he failed to prove the genuineness of gift and the amount of ₹ 10 lacs was treated as undisclosed income of the assessee for the assessment year under consideration. In the instant case, the assessee failed to establish the genuineness of the transaction and creditworthiness of the donor during the course of .....

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or was recorded behind the back of the assessee. In fact the statement of the donor, Shri Abinashi Lal Bajaj was recorded by Investigation Wing and same was confronted to the assessee which fact becomes clear from the latter written by the Assessing officer on 9.1.2006 which is as under: "You have received a gift amounting to ₹ 10 lakhs from Abinashi Lal Bajaj. The statement of Bajaj was recorded by the ADIT (Inv) II, Chandigarh. In his statement Shri Bajaj has stated that he has not .....

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he assessee vide letter dated 20.2.2006 stated as under: "1 That during the period relevant to Assessment year 2000-01, I received a gift for ₹ 10 lakhs from Abnashi Lal Bajaj s/o Shri B.D. Bajaj r/o H No. 3046, Sector 20D, Chandigarh through Pay order which was credited to may saving account No. 1127 with PNB Manimajra. Copy of the said bank statement Gift Deed duly signed by the donor and a copy of the affidavit executed by the said donor to this effect has already been submitted. 2 .....

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added towards the taxable income." From the above it becomes clear that the assessee has surrendered the amount after being fully cornered and therefore once the addition has been made on the basis of admission no appeal is maintainable. In any case the assessee has not been able to show any relationship with the donor and therefore there can not be any love and affection with the non relative and the assessee has not produced any evidence to show close relationship between the assessee an .....

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rnered and the addition has been made on the basis of the payment made by the assessee. The Tribunal has also observed that the assessee failed to show any relationship with the donor and, therefore, there cannot be any love and affection with the non-relative and further the assessee could not produce any evidence to show close relationship between him and Shri Avinashi Lal Bajaj. 14. After perusing the records, it is observed that the Revenue has unearthed the scam in respect of bogus gifts. T .....

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iled to satisfy the ingredients of section 68 of the Act. The onus was on the assessee to prove the genuineness of the transaction and creditworthiness of the donor. In the case of Jaspal Singh Vs. CIT (2007) 290 ITR 306 (P&H), the facts of the case were that the assessee had constructed a house property. He had claimed to have received various gifts aggregating to ₹ 15,69,000/- in the assessment years 1997-98 to 2001-02 from NRIs. In assessment year 1998-99, the assessee had claimed t .....

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r making the gift. The addition was confirmed by the learned CIT (Appeals). In second appeal, the Tribunal also dismissed the appeal of the assessee. The assessee preferred an appeal against the order of the Tribunal before the Hon'ble Jurisdictional High Court and the Hon'ble Jurisdictional High Court held as under : "It is well-settled that mere identification of donor and showing the movement of gift amount through banking channel is not enough to prove genuineness of the gift. T .....

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e. In the said judgments, the Tribunal recorded a finding that the gifts were genuine which was held to be a pure finding of fact. We have dealt with this aspect of the matter at length in our judgment dated July 31, 2006, in Subhash Chander Sekhri v. Deputy CIT (2007) 290 ITR 300 (P&H) (ITA No.265 of 2006) We are of the view that the concurrent findings of fact recorded by the authorities that the gifts in question were not genuine, are pure findings of fact and no substantial question of l .....

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under consideration, the assessee had received a gift amounting to ₹ 1,75,000 on payment of an equal amount in cash, along with premium for arranging that gift. During proceedings under section 148 of the Act initiated against the assessee, the amount equal to the amount of the gift, i.e., ₹ 1,75,000 and ₹ 17,500 on account of premium at the rate of 10 per cent. were added to the income of the assessee. The Commissioner of Income-tax (Appeals) (in short "the CIT(A)"), .....

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appeal carried by the Revenue was dismissed by the Tribunal vide order under appeal and it was observed that since the Assessing Officer had not recorded his satisfaction before initiating the penalty proceedings, the order of penalty could not be sustained." The Hon'ble jurisdictional High Court has held as under:- "The point for consideration in this case is, whether the Tribunal was justified in deleting the penalty levied against the assessee under section 271(1)(c) of the Act. .....

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ding of satisfaction for initiation of penalty proceedings in the course of assessment proceedings stands concluded against the assessee in the judgment of this court reported in CIT v. Pearey Lal and Sons (EP) Ltd. [2009] 308 ITR 438 (P&H). 8. In view of the above, the substantial question of law is answered in favour of the Revenue and the appeal is allowed accordingly." 16. In view of the latest decision of the Jurisdictional High Court on the issue at hand, I am of the opinion that .....

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sed in the return of income. The assessee has disclosed the factum of receipt of gift of ₹ 10 lacs in the return of income. The said claim of the assessee was found to be incorrect and false and when the concealment of income was detected by the Revenue, the assessee made false claim and ultimately surrendered the amount for taxation. The assessee has knowingly made a false claim in the return of income to the extent of ₹ 10 lacs, which is not a small amount by any means. The alleged .....

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een Mr.Bajaj (alleged donor) and the assessee and there was no occasion for gift. In my considered opinion, the decision of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC) relied upon by the learned counsel for the assessee is not applicable to the facts and circumstances of the present case. Similarly, other decisions relied upon by the learned counsel for the assessee are not applicable to this case since the facts are different and .....

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ot be considered a voluntary surrender. The contention of the assessee that the amount of alleged gift was voluntarily surrendered to avoid litigation and buy peace with the Department, cannot be accepted in view of the decision of the Hon'ble Jurisdictional High Court in the case of Rajesh Chawla Vs. CIT , 203 CTR 209 (P&H) and the Hon'ble Supreme Court in the case of Mak Data P. Ltd. Vs. CIT (2013) 358 ITR 593 (SC). In the instant case, the original return of income was filed by th .....

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f account of assessee s proprietary concern. Subsequently, proceedings under section 147 of the Act were initiated and notice under section 148 of the Act was issued on 4.3.2005. The assessee claimed that he had received a gift of ₹ 10 lacs on 22.11.1999 from Shri Avinashi Lal Bajaj. It is also observed that in response to notice under section 148 of the Act, the assessee submitted his letter dated 27.4.2005, wherein it was stated that the original return filed by him on 31.10.2000 may be .....

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made voluntary surrender of the amount of gift. In my opinion, there was a deliberate attempt on the part of the assessee to evade tax on the amount of ₹ 10 lacs. The explanation given by the assessee regarding the alleged gift was found to be false by the Assessing Officer. The Assessing Officer has brought ample evidence on record to discharge its burden of proving concealment. In the assessment order itself, the Assessing Officer has stated that penalty proceedings under section 271(1)( .....

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any mistake of law or fact as the assessee came to know that the Revenue has made detailed investigation. On investigation, the claim made by the assessee was found to be false. Therefore, the assessee is precluded from taking the plea that the facts were disclosed in the return of income. After perusing the order of the Assessing Officer, it is clear that the Assessing Officer was satisfied that the assessee has concealed the income or furnished inaccurate particulars of income In the instant c .....

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eedings. The findings given in assessment proceedings are certainly relevant and have probative value, but such findings are material alone and may not justify the imposition of penalty in a given case, because the consideration that arises in penalty proceedings are different from those arising in assessment proceedings. However, in the instant case, in the penalty proceedings, the assessee has not taken any new plea. The only contention of the assessee is that the surrender made by the assesse .....

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r and illegal means and tried to create false documentation to artificially suppress his earnings in order to evade tax liability. This clearly showed the conscious and willful action on the part of the assessee and, hence penalty under section 271 (1) (c) of the Act should be levied. It is relevant to observe here that in view of the judgment of the Hon'ble Supreme Court in the case of Dharmendra Textile Processors (2008) 306 ITR 277 (SC), the concept of penalty has not undergone a change. .....

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members of the group are indulging in tax evasion by showing income from other sources as agricultural income. During the investigation, the assessee Rajesh Chawla was asked to produce the evidence about agricultural income. In response to the said query, Rajesh Chawla failed to produce any documentary evidence in support of his claim. However, the assessee s counsel offered to disclose income subject to no penalty but he was told that disclosure could not be conditional. The assessee was again .....

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g Officer initiated penalty proceedings under section 271 (1) (c) of the Act. The stand of the assessee was that since agricultural income was voluntarily surrendered before being detected by the authorities, no penalty was leviable. The Assessing Officer did not accept assessee s contention and held that the assessee furnished inaccurate particulars of income and levied penalty under section 271 (1) (c) of the Act. On appeal, the learned CIT (Appeals) upheld the order of the Assessing Officer. .....

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close any action for concealment of income. Judgments of the Hon'ble Supreme Court in Sir Shadi Lai and CIT vs. Suresh Chandra Mittal (2001) 170 CTR (SC) 182 : (2001) 251 ITR 9 (SC) have rightly been distinguished by the Tribunal. Findings recorded by the Tribunal cannot be held to be perverse in any manner, the same being based on relevant material. The assessees have been held to be members of the same family and it has also been found that revised returns were filed on coming to know abou .....

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eals are dismissed." 18.1 In the above case, the Hon'ble Jurisdictional High Court held that it was not a case of bonafide voluntary disclosure but only to avoid consequences of law. The Hon'ble Jurisdictional High Court further held that the revised returns were filed on coming to know about detection of concealment. In the instant case also, the surrender of amount of gift was not voluntary and the same was surrendered after detection of concealment by the Revenue. In view of the .....

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der of his concealed income, he has to be absolved from penalty. The relevant observations of the Hon'ble Supreme Court (pages 597 to 599) are as under : We have heard counsel on either side. We fully concur with the view of the High Court that the Tribunal has not properly understood or appreciated the scope of Explanation 1 to Section 271(l)(c) of the Act, which reads as follows:- "Explanation l:-Where in respect of any facts material to the computation of the total income of any pers .....

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total income of such person as a result thereof shall, for the purposes of clause (c) of this sub section, be deemed to represent the income in respect of which particulars have been concealed." The Assessing Officer, in our view, shall not be carried away by the plea of the assessee like "voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement", etc. to explain away its conduct. The question is whether the assessee has offered an .....

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tuted the income and not otherwise. Assessee has only stated that he had surrendered the additional sum of ₹ 40,74,000/- with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income tax department. Statute does not recognize those types of defence sunder the explanation 1 to Section 271(l)(c) of the Act. It is trite law that the voluntary disclosure does not release the Appellant-assessee from .....

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of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003,inthecase of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of inco .....

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income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee 'had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particu .....

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