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2016 (9) TMI 9 - GUJARAT HIGH COURT

2016 (9) TMI 9 - GUJARAT HIGH COURT - TMI - Penalty levied u/s 271(1)(c) - assessee had furnished inaccurate particulars of the income - Held that:- The assessee company was in its first year of incorporation subjected to survey operation. At the time when the due date for filing return had not expired. During the survey the assessee admitted certain bogus share application money to the tune of ₹ 5.86 crores. Before the expiry of the due date for filing return, assessee also filed a retu .....

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any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct such person to pay by way of penalty which shall not be less than, but which shall not exceed three times the amount of tax sought to be evaded by the reason of concealment of particulars or furnish inaccurate particulars of such income. - As noted, the revenue desired to bring in the element of the assessee having furnished inaccurate particulars of its income. The fact .....

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FOR THE APPELLANT : MR NITIN K MEHTA, ADVOCATE FOR THE OPPONENT : MR RK PATEL, ADVOCATE ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The Revenue is in appeal against the judgment of the Income-Tax Appellate Tribunal dated 9.10.2015 raising following questions for our consideration : (a) Whether the Hon ble ITAT is right in law and on facts of the case in allowing the appeal of the assessee and thereby deleting the penalty levied by the AO u/s 271(1)(c) of the IT Act of ₹ 1,99, .....

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ncial year 2009-2010. A survey operation under Section 133A of the Income-Tax Act,1961 (for short the Act ) was conducted in case of the company on 1.7.2010. During the course of survey, the company made a disclosure of ₹ 5.86 crores (rounded off) on the ground of introduction of bogus share capital during the financial year 2009-10. Such disclosures were duly matched by other investigation carried out by the department. 2.2 On 31.8.2010, the assessee - company filed a return of income for .....

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osed penalty of ₹ 1.99 crores (rounded off) @ 100 per cent of the tax sought to be evaded. 2.3 The assessee carried the matter in appeal. The CIT (Appeals) by an order dated 9.10.2015 dismissed the appeal, inter-alia, on the ground that had a survey not been conducted in case of the assessee, such amount of ₹ 5.86 crores would not have been brought to tax. Assessee s filing of the return and offering such income to tax was only on account of survey operation and thus, not voluntary. .....

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e survey, that the assessee filed a return in which such income was also admitted. The material on record would clearly suggest that but for the survey the assessee would never have offered such income to tax. The finding of the Assessing Officer as well as CIT (Appeals) to this effect were not reversed by the Tribunal. That being the position, the penalty under Section 271(1)(c) of the Act was leviable. He relied upon the decision of the Supreme Court in case of MAK Data (P) Ltd. v. CIT, report .....

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Officer to levy penalty under Section 271(1)(c) of the Act. In the present case, to the income disclosed in the return, no additions were made by the Assessing Officer, no penalty therefore could have been levied. 5. Present is the peculiar case. The assessee - company was in its first year of incorporation subjected to survey operation. At the time when the due date for filing return had not expired. During the survey the assessee admitted certain bogus share application money to the tune of & .....

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hat if the Assessing Officer during the course of any proceeding under the Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct such person to pay by way of penalty which shall not be less than, but which shall not exceed three times the amount of tax sought to be evaded by the reason of concealment of particulars or furnish inaccurate particulars of such income. Relevant provision or Section 271 of the Act .....

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less than, but which 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. 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 .....

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represent the income in respect of which particulars have been concealed. 7. As noted, the revenue desired to bring in the element of the assessee having furnished inaccurate particulars of its income. The fact that the assessee did make a disclosure of such income in the return filed and the Assessing Officer was not dissatisfied by such disclosure is not in dispute. The assessee having filed the return by the due date for filing return, in which such income was also offered to tax, the questi .....

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ssee having concealed particulars of the income or having furnished inaccurate particulars of such income. When neither of these two conditions apply, penalty cannot be levied under the said provision. 9. Attempt on the part of counsel for the revenue to rely upon explanation (1) to Section 271(1) of the Act would also be futile. Said explanation provides that if a person fails to offer an explanation or offers explanation which is found by the Assessing Officer to be false or offers an explanat .....

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sessee fails to offer an explanation or offers an explanation which is found to be false, the explanation would apply and by deeming fiction, the assessee would be for the purpose of clause (c) of sub-section (1) of Section 271 of the Act be deemed to have concealed the particulars of the amount added or disallowed in computing total income of the assessee. 10. The decision of the Supreme Court in case of MAK Data (P) Ltd. (supra) was based on different set of facts. It was a case where the asse .....

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he said sum of ₹ 40.74 lacs to tax as income from other source and also initiated penalty proceedings with respect to such sum. When the assessee pressed the clause of making a declaration to buy peace, the matter ultimately reached the High Court which accepted the revenue s plea that the assessee had not offered any explanation about concealment of the income. The High Court thus applied explanation (1) to Section 271(1)(c) of the Act and upheld the penalty. This decision was carried by .....

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f 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, 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 dis .....

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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. 11. The vital difference in the aforesaid case, thus, was that the assessee had already filed a return disclosing an amount of ₹ 16.17 lacs. It was only during the assessment proceedings that the assessee agreed to surrender further sum of ₹ 40.74 lacs .....

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