TMI Blog2016 (8) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... fact of the matter in the present case before us is that the assessee did not had any such sub-tenancy in the said property as the assessee failed to prove the existence of sub-tenancy and the claim of the assessee was found to be false claim and explanations offered by the assessee were found by the Revenue to be false and clearly explanation1 to Section 271(1)(c) of the Act is hit and the assesse is liable for penalty u/s 271(1)(c) of the Act - Decided against assessee - I. T. A. No. 6740 / Mum/ 2012 - - - Dated:- 3-8-2016 - Shri Saktijit Dey, Judicial Member And Shri Ramit Kochar, Accountant Member Revenue by : Shri B.S. Bist, Sr. D.R. Assessee by : Shri S.C. Tiwari ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the Revenue, being ITA No. 6740/Mum/2012, is directed against the appellate order dated 3rd August, 2012 passed by learned Commissioner of Income Tax (Appeals)- 30, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2008-09, the appellate proceedings before the learned CIT(A) arising from the penalty order dated 11th May,2011 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 271(1)(c) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to occupy the office premises and to do business transactions for the benefit of both of them and all cost were borne by Mr. Rajni C. Shah. It was submitted that by a Deed of Conveyance dated 9th March, 2007, M/s. Leach Weborney sold , conveyed and transferred the land and structures thereon to M/s Second Land Developers Private Ltd. subject to the occupations of the areas in possession with the tenants/sub- tenants. Thereafter by a Deed of Surrender of Tenancy dated 12th April, 2007 the assessee surrendered to M/s Second Land Developers Private Ltd. all his tenancy rights in the said premises in his occupation. The agreement dated 12th April, 2007 was stamped and registered and was submitted by the assessee before the AO during the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act. The AO asked the assessee to prove his sub-tenancy and also submit a copy of the sub-tenancy agreement entered into by him with the original tenant said Mr. Rajni C. Shah who allowed the assessee to use office premises in the year 1995 along with proof of payment of rent, telephone bills, electricity bills, property tax etc to prove sub-tenancy in favour of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and sub-tenants of the property wherein name of the assessee did not appear as sub-tenant of the said property. Shri Rajni C. Shah appeared before the A.O. whereby statement was recorded u/s 131 of the Act wherein he denied that any sub-tenancy or sub-lease was created by him or his family members with respect to the said property and he stated that he confirmed the deed of surrender of tenancy dated 12-04-2007 executed by the assessee with M/s Second Land Developers Private Limited as confirming party as several documents were signed by him without reading the material as documents were voluminous . It was observed by the A.O. from the various documents and enquiries made, statements recorded, that the assessee has fraudulently created sub-tenancy which never existed with a view to avoid tax by claiming the money received as long term capital gain and claiming exemption u/s 54F of the Act. The A.O. also went through the audit report of M/s Nevron Properties and Estates wherein the assessee was partner that the assessee has shown address as 84, Bhakhtawar,22, Narayan Dabholkar Road, Malabar Hill, Mumbai-66 and even in personal capital account and balance sheet filed, it was obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act shall be initiated against him for withdrawal of claim . The assessee requested the AO to drop penalty proceedings initiated against him by the AO u/s 271(1)(c) of the Act for filing inaccurate particulars of income. The A.O. rejected the contentions of the assessee. The A.O. observed that the assessee has claimed exemption u/s 54F of the Act on surrender of tenancy rights although the assessee was not the sub-tenant of the property of which tenancy rights were surrendered. The assessee withdrew the claim and surrendered the amount only when the assessee was cornered by the A.O. after making rigorous efforts and collected the evidences which forced the assessee to revise the claim made in the return of income as the assessee was never sub-tenant of the said property and said fact was never disclosed in the return of income filed with the Revenue. In the statement recorded on oath of Shri Rajni C. Shah whereby said Sh Rajni C. Shah stated that no sub-tenancy or sub-lease was done by him or his family member of the said premises, it was clear that there was a malafide intention of the assessee to conceal the particulars of income and the assessee never withdrew the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the office premises in occupation of the assessee. The assessee invested this amount of ₹ 1,13,73,000/- to get exemption from long term capital gains u/s 54F of the Act. The assessee submitted that since only permission was given by Sh. Rajni C Shah in 1995 to the assessee to occupy and use his office and hence no contemporary documents were available with the assessee and no costs such as rent, taxes, electricity etc were incurred by the assessee since 1995 till the date of deed of surrender of tenancy rights dated 12-04-2007. The assessee submitted that he was paid ₹ 1,13,73,000/- by the said Second Land Developers Private Limited, the new owner /buyer because they wanted immediate vacant physical possession of the property and since the part of premises was occupied by the assessee and hence the assessee was paid ₹ 1,13,73,000/- by Second Land Developers Limited to get immediate vacant physical possession of the property. The assessee submitted that the statement of Sh. Rajni C Shah be viewed in the light of these facts. The assessee submitted that he decided to pay tax voluntarily of his own but since the assessee did not had the contemporary evidence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not submitted by the assessee. No electricity connection was there in the name of the assessee and no municipal taxes were paid by the assessee with respect to said property. Statement u/s 131 of the Act was recorded by the AO wherein Shri Rajni C. Shah denied having given any sub-tenancy to the assessee. The assessee also did not had any license obtained under Shops and Establishment Act in his favour. The assessee had surrendered the amount provided no penalty will be levied u/s 271(1)(c) of the Act. The ld. CIT (A) accepted the contentions of the assessee. The ld. CIT(A) held that the assessee s case is covered by the decision of Hon ble Supreme Court in the case of CIT v. Reliance Petroproducts (P) Ltd (2010) 322 ITR 158(SC) wherein the Hon ble Supreme Court held that making of an incorrect claim in law cannot tantamount to furnishing inaccurate particulars of income and in the instant case the Revenue can say that the assessee had made an incorrect claim of deduction u/s 54F of the Act which did not found favour with the Revenue but penalty u/s 271(1)(c) of the Act is not leviable under these circumstances as per ratio of decision of the Hon ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue , and the claim of the assessee that he surrendered the amount voluntarily is wrong and incorrect. No contemporary evidences were filed by the assessee either during the assessment proceedings or during the penalty proceedings to prove his sub-tenancy. No contemporary evidences were even filed during appellant proceedings to prove his sub- tenancy. Thus, it is absolutely wrong to say that the assessee surrendered the amount to avoid litigation and to buy peace of mind. The ld. CIT(A) deleted the penalty so levied by the A.O. by relying upon the decision of Hon ble Supreme Court in the case of CIT v. Reliance Petroproducts P. Ltd. (2010) 322 ITR 158 by holding that the case of the assessee is squarely covered by the ratio of law laid down by the Hon ble Supreme Court while the fact of the matter is that the assessee case is not covered by the above decision of Hon ble Supreme Court as the assessee has made an ex-facie bogus claim of treating the amount received on surrender of tenancy as income from long term capital gains and claiming deduction u/s 54F of the Act. Deduction u/s 54F of the Act was not allowed to the assessee as the income was assessed under the head income fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shah, the original tenant granted permission to the assessee in the year 1995 to occupy the portion of the premises . It was submitted that there was no written sub-tenancy agreement entered with Sh. Rajni C. Shah in the year 1995 when permission to occupy premises was granted by said Sh. Rajni C. Shah in favour of the assessee. The said Sh. Rajni C. Shah admitted that there was no sub-tenancy rights or sub-lease granted by him or his family members to the assessee in the statement recorded u/s 131 of the Act before the AO and several papers were signed by him without reading the voluminous material. It is submitted that the A.O. has made enquiries with BEST and BMC with respect to the electricity connection in the name of the AO installed at the said premises and to confirm the payment of taxes by the assessee. The learned counsel of the assessee submitted that it is irrelevant whether electricity bills or taxes were paid by the assessee or not to adjudicate the existence of sub-tenancy in favour of the assessee by Sh. Rajni C. Shah in the year 1995 with respect to the said property as it was an oral grant of permission by the said Sh. Rajni C. Shah in favour of the assessee to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatsoever was produced by the assessee to prove sub-tenancy. It was submitted by learned DR that the assessee has not filed any appeal against the quantum assessment order passed by the AO u/s 143(3) of the Act, which has attained finality. Thus, the ld DR prayed that penalty levied by the AO u/s 271(1)(c) of the Act be confirmed and order of the learned CIT(A) be set aside. 10. We have considered the rival contentions and perused the material placed on record including the case laws relied upon by both the parties. We have observed that the assessee is partner in a partnership firm M/s Nevron Properties and Estates which is engaged in business of real estate agencies and brokerage. The assessee has declared in the return of income filed with the Revenue , income from long term capital gains of ₹ 1,13,73,000/- received on surrender of sub-tenancy with respect to the portion of the property situated at 66, Off E Moses Road, Lower Parel, Mumbai vide stamped and registered deed of surrender of tenancy dated 12-04-2007 executed by the assessee with new owners of the property M/s. Second Land Developers Private Limited wherein Mr Rajni C. Shah, the original tenant of the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Developers Private Limited to the assessee as the assessee was in occupation and possession of the said premises and the said M/s Second Land Developers Private Limited wanted immediate vacant possession of the said premises and hence payment of ₹ 1,13,73,000/- was made to the assessee by said new owners M/s Second Land Developers Private Limited to vacate the said premises. The AO made enquiries with BEST and BMC , wherein BEST denied that any electricity connection is installed in the said premises in the name of the assessee and BMC denied of having any sub- tenancy registered in the name of the assessee , since the year 1995 till date of execution of deed of surrender of tenancy dated 12-04-2007. The AO recorded statement of Mr. Rajni C. Shah u/s 131 of the Act during assessment proceedings whereby Mr. Rajni C Shah stated on oath that neither he nor his family members have created any sub-tenancy or sub-lease in favour of the assessee and with respect to signing as confirming party of deed of surrender of tenancy dated 12-04-2007 executed by the assessee with M/s Second Land Developers Private Limited , Mr. Rajni C Shah affirmed of signing the said deed dated 12-04-2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee did not have any contemporary evidence to prove his sub-tenancy which was stated to be granted to him in the year 1995 by Mr. Rajni C. Shah, the original tenant and also agreement of sub-tenancy is stated to be an oral agreement wherein Mr. Rajni C. Shah granted him permission to occupy and use the said office premises since the year 1995 till the year 2007.Thus, the assesee in quantum proceedings failed to discharge primary onus cast upon by him under the Act to prove his sub-tenancy and the claims lodged for treating the consideration received on surrender of tenancy as income from long term capital gains . It is incomprehensive and unbelievable by any standards and yardsticks that the assessee who was allegedly occupying and using the said portion of the premises/property as his office from the year 1995 to 2007 does not have any contemporary evidences to support and demonstrate his alleged continuous occupation/possession of the said premises since 1995 to 2007 including agreement for grant of sub-tenancy and other relevant contemporary evidences to support and prove his sub-tenancy . In-fact the assessee who is an estate broker vide his own admission has stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on record contemporary evidences to prove his sub-tenancy in quantum proceedings with respect to occupation/possession of the said premises which the assessee miserably failed to do us. The primary onus is cast on the Revenue under penalty proceedings u/s 271(1)(c) of the Act to bring on record cogent incriminating material to substantiate that ingredients of Section 271(1)(c) of the Act are fulfilled which in the instant case were duly fulfilled by the Revenue by conducting detailed enquiry and investigations to bring on record cogent incriminating material to disprove the story of sub-tenancy set up by the assessee. Once the primary onus cast on the revenue in penalty proceedings is discharged, the burden shift on the assessee to bring on record bonafide explanations to support the claim filed by the assessee in the return of income filed with the Revenue as per mandate of Section 271(1)(c) of the Act read with explanation. The explanation submitted by the assessee to explain the claim filed by the assessee in the return of income with respect to the income earned from long term capital gains on surrender of tenancy and claim of deductions u/s 54F of the Act , were found to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue. The Hon ble Supreme Court in the case of Mak Data Private Limited v. CIT (2013) 358 ITR 593(SC) has observed that voluntary disclosure does not release the assessee from mischief of penal proceedings u/s 271(1)(c) of the Act and the AO 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 , as under: 6. 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(1)(c) of the Act, which reads as follows :- Explanation 1 - Where in respect of any facts material to the computation of the total income of any person under this Act, - (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true 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. 10. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to demolition of the building, there were 5 tenants including one Mr. Sachdeva. That Mr. Sachdeva transferred the tenancy to the assessee before us and without the knowledge of the landlady was the response of the landlady. It is, therefore, rightly held that so long as the list of authorized tenants in the building does not contain the name of the assessee, then, his entering upon the property has to be probed further. This probe and in which the explanation was forwarded that one Mr. Sachdeva, the original tenant surrendered his tenancy rights and rather relinquished the flat in favour of the landlady. Even that version was not found to be genuine. The findings of the Assessing Officer based on the answers given and the replies furnished are reproduced at para-7 of the Tribunal's order. We are of the opinion that the Tribunal rightly held that this was a fit case for imposition of penalty. The entire explanation with regard to the tenancy rights, if surrendered has not been found to be true. Even in penalty proceedings, the assessee was not able to give a satisfactory explanation that the claim made by him in the return of income was bonafide and that he had declared all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (1) the law postulates that in cases referred by clause (c) and (d) in addition to the tax, if any, payable by the assessee, a sum which shall not be less than, but shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits, shall be payable by way of penalty. It is that clause which has been applied. We do not think that the reasoning of the Tribunal in this regard and particularly in para-9 of the order under challenge raises any substantial question of law. The appeal cannot be entertained even on that ground. It is accordingly dismissed. The decision relied upon by the assessee are clearly distinguishable as in the case of CIT v. Reliance Petroproducts Private Limited(supra) , Hon ble Supreme Court held that where the assessee filed a claim of deduction which did not found favour with the revenue being not sustainable at law , while admittedly no information given in the return of income was found to be incorrect or inaccurate will not make the assessee liable to penalty u/s 271(1)(c) of the Act as merely maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee wherein it is claimed that the assessee holds sub- tenancy in the afore-stated property since the year 1995 till 2007 and proceeds received on purported alleged surrender of tenancy were deliberately camouflaged as income from long term capital gains with an intent to claim deduction u/s 54F of the Act to reduce tax liability. The ratio of decision in Rajasthan Spinning and Weaving Mills(Supra) clearly stipulates that penalty is punishment for an act of deliberate deception by the assessee with an intent to evade duty be adopting any of the means mentioned in the section i.e. fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provision of the Central Excise Act or of the rules made there-under . It is also pertinent to mention here that decision in the case of Rajasthan Spinning and Weaving Mills(Supra) was rendered by the Hon ble Supreme Court in context of Central Excise Act while the proceedings before us are under Income Tax Act,1961.The Hon ble Supreme Court held in para 23 as under : 23. The decision in Dharamendra Textile Processors case (supra) must, therefore, be understood to mean that though the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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