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2016 (9) TMI 442 - ITAT PUNE

2016 (9) TMI 442 - ITAT PUNE - TMI - Penalty u/s 271(1)(c) - default in declaring the income - whether income is not assessable in the hands of assessee in his individual capacity at the first place and is rightly assessable in the hands of different person i.e. AOP? - Held that:- plea of the assessee that the bank statement were given to the chartered accountant and he failed to offer the impugned income is too vague and bald to be assigned any acceptance. The bounden duty of assessee to furnis .....

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ax and self assessment tax obligations as per the framework of law. The assessee has not shown to have paid any tax towards impugned gain. Thus, this plea of oversight on behalf of the Assessee is listless. Hence, no case of reasonable cause for omitting to include the income in the first return is successfully made out. The preponderance of probabilities is weighed against the assessee. We also wish to note here that penalty proceedings in question are governed by S. 271(1)(c) read with Explana .....

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ther for better co-operation, the parties were to bear their own losses or retain their own profits contrary to the case made out by the assessee. If the version of the Assessee is to be given any credence, one has to see the conduct of the assessee. The obligations of the Assessee as one of the members who allegedly combined to form alleged AOP is placed at par with other members to comply with tax laws. No PAN number in the capacity of AOP was reportedly obtained. The alleged AOP is also not s .....

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members have acted in their respective personal capacity which belies presence of any alleged understanding in the nature of purported AOP. The above is enumeration to show that no assertive justification has been advanced by the assessee to prove bonafides of plea of existence of AOP. Mere abstract reliance on case laws without any connection with the underlying facts deserves to be discredited. - In the light of above discussion, the explanation offered for the default in declaring the in .....

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led by the assessee is against the penalty order of CIT(A)-IT/TP, Pune dated 01.01.2014 relating to assessment year 2008-09 passed under section 271(1)(c) of the Income-tax Act, 1961 (in short the Act ). 2. By way of the present appeal, the assessee has challenged the action of the CIT(A) in confirming the impugned penalty levied under section 271(1)(c) of the Act at ₹ 8,82,000/- by the Assessing Officer. 3. Briefly stated, the relevant facts concerning the issue raised by the assessee are .....

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d, the assessee has got his share of sale consideration at ₹ 47,68,365/-. The Assessing Officer found on verification of the return of income that the assessee has not declared this transaction of sale of land in his return of income. In response to notice by Assessing Officer, the assessee filed his revised return on 26.08.2010 in which he has shown total income of ₹ 42,42,030/- including Long Term Capital Gain (LTCG) arising from sale of land at ₹ 41,24,384/-. Thereafter, the .....

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essee. The Assessing Officer also alleged that assessee has concealed income from the LTCG by not disclosing his share on sale of land in the return of income. In the penalty order, the Assessing Officer observed that assessee did not offer any plausible explanation for concealment of income. The Assessing Officer noticed that the explanation offered by the assessee in the course of the penalty proceedings whereby the assessee submitted that since 2005 the assessee was engaged as an estate broke .....

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the deal was about to be finalized, the elder brother of the assessee suffered from health problems of serious nature, on which he had to be hospitalized. He was therefore unfortunately engrossed in his brother s treatment and therefore handed over bank accounts and other details to his CA for preparing tax return, which was filed in March, 2009. As all these transactions were reflected in the bank accounts, he was under the bonafide belief that his CA must have disclosed income in the return of .....

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ld not contact other co-owners and also to his CA. He stressed that there was no malafide intention whatsoever, on his part to evade tax liability. He paid the taxes in the course of assessment proceedings and has also not contradicted the assessment by way of appeal. The Assessing Officer, however, perceived the facts against the assessee and alleged that the assessee has omitted to offer the income altogether in the return of income and therefore the assessee is liable to penalty for concealme .....

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before the CIT(A) that he along with his friends later formed AOP for this venture. The CIT(A) was not convinced with the explanation offered by the assessee to be bonafide one. He observed that land were purchased by the assessee and others in the capacity of co-owners. The AOP was formed later. The CIT(A) thus observed that land so purchased did not belong to AOP and therefore AOP could not have paid taxes on the land which did not belong to it. The CIT(A) also noted that there is no referenc .....

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urther observed that assessee acted only after the Department started enquiries and in the absence of information in the possession of the Department, the taxes due to the Department could not be collected. The CIT(A) also observed that the assessee had duly verified his return of income as true and correct. It is required from the taxpayers that they exercise due diligence and declare correct income while filing the return of income. The CIT(A) accordingly confirmed the action of the Assessing .....

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erated the submissions made before the Assessing Officer that due to serious health problems faced by the brother the assessee could not pay attention to the matters and relied upon the Chartered Accountant resulting in error. Thus, there is a reasonable cause as contemplated under section 273B of the Act. He thereafter submitted that the Assessing Officer as well as CIT(A) failed to appreciate the position on facts in proper perspective. The agricultural land in question was purchased along wit .....

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al gains in the hands of the other co-owners as well as the assessee. He has offered the income and paid the taxes only to avoid any unwarranted litigation. The penalty is thus not justified. He, thereafter, adverted our attention to the English Translation of the development agreement at Page No.20 of the Paper Book. He observed with reference to the aforesaid development agreement that the agreement was entered into on 11.03.2005 between five parties including the assessee with vendors namely .....

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to at the time of acquisition of land, it is evident that the intention was to exploit the land so acquired commercially as a joint venture and consequently the income therefrom is required to be taxed in the hands of the AOP and not in the hands of the respective individual owners. It is a different matter that the other joint owners as well as the assessee has offered the income in their respective hands which will not change the position of law. For the proposition that income to be assessed .....

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ot;associate" means, according to the Oxford Dictionary, "to join in common purpose, or to join in an action." Therefore, an association of persons must be one in which two or more persons join in a common purpose or common action, and as the words occur in a section which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains. This was the view expressed by Beaumont, C. J., in Commissioner of Income-tax v. Lakshmidas Devida .....

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saying that these persons did constitute an association ........" We think that the aforesaid decisions correctly lay down the crucial test for determining what is an association of persons within the meaning of section 3 of the Income-tax Act, and they have been accepted and followed in a number of later decisions of different High Courts to all of which it is unnecessary to call attention. It is, however, necessary to add some words of caution here. There is no formula of universal appli .....

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310 (SC) to lay stress to his plea that the present agreement between the assessee and other co-owners was in the nature of AOP and the income generated from the sale of land should be correctly taxed in the capacity of the AOP. Shri Naniwadekar thus asserted that the income itself has been wrongly assessed in the hands of assessee. There is, thus, no justification to impose penalty based on such a wrong assessment. He further exhorted that penalty proceedings are independent of the assessment .....

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for formation of AOP is required. The existence of AOP is required to be inferred from the action of the various co-owners where the parties joined hand for mutuality of interest to share income and liability. He also insisted that offering of income by other co-owners in their individual capacity as capital gains is irrelevant consideration for determination of the taxability in the hands of the assessee. Shri Naniwadekar thus submitted that in view of the income assessable in the hands of AOP .....

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undisclosed income was unearthed only because of the AIR information in possession of the Revenue which would have otherwise escaped assessment causing loss to the Revenue. The penalty was imposed at minimum rate and is merely a remedy for the possible loss of revenue. The Ld. DR submitted that the land purchased by the co-owners were sold and the substantial profits were generated. The substantial amount was received through banking channel which is reflected from the bank statement. Therefore, .....

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t been offered to tax as AOP and therefore the theory propounded by the assessee that the income is taxable in the hands of the AOP is also devoid of any merit. He, therefore, submitted that no interference is called for with the action of the Revenue in imposing the minimum penalty on these speaking facts. 10. We have carefully considered the rival submissions. The assessee has assailed the imposition of penalty under section 271(1)(c) and contends that that no penalty is warranted in the facts .....

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ove that the assessee admittedly did not file return of income within the due date specified under section 139(1) of the Act. The impugned capital gain of ₹ 41,24,384/- and another income towards bank interest ₹ 21,941/- was not offered for taxation in the belated return of income filed under S. 139(4) of the Act. The income was however offered by a subsequent return in the course of scrutiny proceedings. The Assessing officer initiated penalty proceedings in the course of assessment .....

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e, as per the valid return on record, the income remains undeclared and kept away from the revenue authorities. Secondly, the income was stated to have been declared in subsequent return as discussed above, only after the income was found by the assessee to be detected by revenue as per specific AIR information. Thus, the onus squarely lies on the assessee to justify the absence of any culpability. The plea of the assessee that the bank statement were given to the chartered accountant and he fai .....

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taxable income. Be that as it may, apart from declaring the income as aforesaid; the assessee is expected to meet advance tax and self assessment tax obligations as per the framework of law. The assessee has not shown to have paid any tax towards impugned gain. Thus, this plea of oversight on behalf of the Assessee is listless. Hence, no case of reasonable cause for omitting to include the income in the first return is successfully made out. The preponderance of probabilities is weighed against .....

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om sale of property is in the nature of business income and taxable in the hands of the AOP and thus not rightly susceptible to tax in the hands of the assessee at the first place. We note that the several citations were referred to lend support to this plea. However, we find such averment to be an argument of despair. In the instant case, the investments were made from respective individual sources and the shares were definite and ascertainable. As borne out from the conduct of the other co-pur .....

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