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S.L. SHIVA RAJ Versus COMMISSIONER OF INCOME TAX

2016 (10) TMI 405 - ANDHRA PRADESH HIGH COURT

Penalty u/s 271 (1)(c) - appellant/assessee being the sales tax practitioner - non disclosure of income - Held that:- As from the material on record that the appellant/ assessee failed to disclose the income or concealed the income from different sources, filed the return and the same was accepted. However, during search and seizure operation under Section 132 of the Act conducted at Rajiv Gandhi International Airport, Hyderabad, the appellant/assessee was found in possession of ₹ 12,65,90 .....

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s by the assessee. - The Assessing Officer imposed penalty by exercising power under Section 271 (1) (c) of the Act, which was confirmed by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal. Even otherwise, bonafides pleaded by assessee is a question of fact and that would not give raise to substantial question of law before this Court as the appeal under Section 260-A of the Act can be admitted only if substantial question of law is made out by the appellant. Th .....

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of the respondents and against the appellant/assessee. - I.T.T.A.No.134 OF 2016 - Dated:- 14-7-2016 - SRI RAMESH RANGANATHAN AND SRI M.SATYANARAYANA MURTHY, JJ. FOR THE PETITIONER : AVINASH DESAI ORDER: (Per Hon ble Sri Justice M.Satyanarayana Murthy) With the consent of both Sri Avinash Desai, learned counsel for the appellant, and the learned Senior Standing Counsel for Income Tax, the appeal is heard at the stage of admission itself. The assessee, under Section 260-A of Income Tax Act, 1961, .....

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t ) was conducted at Rajiv Gandhi International Airport, Hyderabad while the appellant/assessee was returning from Chennai and the authorities found that he was in possession of ₹ 12,65,900/-, out of the said amount, an amount of ₹ 12,00,000/- was seized. Thereafter, proceedings under Section 147 of the Act were initiated for the assessment year 2002-2003 and issued notice under Section 148 of the Act. In response to the notice under Section 148 of the Act, the appellant/assessee fil .....

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assessee at ₹ 12,15,580/-, initiated penalty proceedings under Section 271 (1) (c) of the Act for the assessment year 2002- 2003 and levied penalty of ₹ 2,80,394/- vide order dated 15.06.2010. Aggrieved by the order of the Assessing Officer passed under Section 271 (1) (c) of the Act, the appellant/assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Hyderabad and the Commissioner of Income Tax (Appeals) vide order dated 10.06.2015 dismissed the appeal filed .....

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e among them is that the Tribunal, Commissioner of Income Tax and Assessing Officer are not clear whether the appellant/assessee is guilty of furnishing of inaccurate particulars or concealment of particulars of income and that the appellant/assessee explained the reason for his failure to furnish the particulars; that he bonafidely believed that those particulars need not be furnished. In the absence of any such finding, the penalty order cannot be sustained, in support of his contentions the a .....

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f the Act and placed reliance on a judgment of the Apex Court rendered in Commissioner of Income Tax, v. Suresh Chandra Mittal (referred supra). On the strength of the judgment (referred supra) learned counsel for the appellant/assessee prayed to allow the appeal since non-disclosure of income is not intentional and prayed to set aside the order of the Tribunal and the penalty order passed by the Assessing Officer. Whereas the learned Standing Counsel of the Income Tax Department supported the o .....

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sing Authority, Commissioner of Income Tax (Appeals), confirmed by Income Tax Appellate Tribunal? POINT: It is the case of the petitioner that he did not disclose the income from various sources bonafidely, therefore, at best it would attract the provisions of Explanation:1 to Section 271 (1) (c) of the Act and thereby penalty cannot be levied for such non-disclosure of income. Section 271 (1) (c) of the Act permits the Assessing Officer or Commissioner of Appeals or Commissioner in course of an .....

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o the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) be deemed to represent the income in respect of which particulars have been concealed and to initiate proceedings. Explanation 3 to Section 271 (1) (c) of the Act says that where any person fails, without reasonable cause, to furnish within the period specified in sub-section (1) of Section 153 .....

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this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under Section 148. Thus, it is clear from the Section 271 (1) (c) of the Act, failure to furnish income and failed to explain the reasons for the same, amounts to concealment of income within the explanation (3) of Section 271 (1) (c) of the Ac .....

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hat he was in possession of ₹ 12,65,000/-, out of the said amount ₹ 12,00,000/- was seized. The search and seizure operation lead to the detection of 27 undisclosed bank accounts of assessee, in which there were deposits and withdrawals made at regular intervals. Even in the deposition under Section 132 (4) of the Act, he admitted that the deposits were out of the unaccounted sources of income. On the basis of the extracts of the said bank accounts, the assessee was asked to furnish .....

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t/assessee filed return of income on 15.05.2009, but the Assessing Officer again issued another letter on 25.08.2009 calling for return. The appellant/assessee by his letter dated 02.09.2009 replied that he has already filed return of income admitting additional income of ₹ 9,16,321/-. Thereupon, the Assessing Officer completed the assessment proceedings determining the total income at ₹ 12,15,580/- as admitted in the return in response to notice under Section 148 of the Act while qu .....

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n does not arise. Even before the Income Tax Appellate Tribunal, no such contention was raised enabling the Tribunal to record a finding that the appellant/assessee bonafidely did not disclose the income except contending that the confirmation of penalty under Section 271 (1) (c) of the Act is improper and arbitrary. Hence, in the absence of any such plea by the appellant/assessee, the authorities are not supposed to record any finding on that issue. This Court while exercising power under Secti .....

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l consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and the impelling necessity of avoiding prolonging the life of any lis. Boodireddy Chandraiah v. Arigela Laxmi (2007) 8 SCC 155 and Santosh Hazari v. Purushottam Tiwari 2001(3) SCC 179) The Apex Court reiterated the same principle while deciding, what is substantial question of law? in Union of India v. Ibrahim Uddin (2012) 8 SCC 148 . In another judgment reported in S .....

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e question of fact to reverse the finding of the Income Tax Appellate Tribunal. In T.Ashok Pai v. Commissioner of Income Tax, Bangalore (2007) 7 SCC 162 the Apex Court held that existence of mens rea is essentially a question of fact, the Tribunal alone, as the highest authority empowered to determine the question of fact, would be entitled to go thereinto and the High Court has no jurisdiction and it should not ordinarily disturb the finding of fact arrived at by the Tribunal. The burden of pro .....

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t that he had acted on the basis of wrong legal advice, the question of his failure to discharge his burden in terms of explanation appended to Section 271 (1) (c) of the Act would not arise. The order imposing penalty is quasi-criminal in nature and, thus, burden lies on the department to establish that the assessee had concealed his income. Since burden of proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt .....

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It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income tax authorities. In Webster's Dictionary, "inaccurate" has been defined as: not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript. It signifies a deliberate .....

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e at a finding that the explanation offered by an assessee, in the event, he offers one was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should be found as of fact that he has not disclosed all the facts which was material to the computation of his income vide Dilip N.Shroff v. Joint Commissioner o .....

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uction thereof would be necessary. Even when the burden is required to be discharged by an assessee, it would not be as heavy as the prosecution vide P.N. Krishna Lal and Ors. v. Govt. of Kerala and Anr 1995 Supp (2) SCC 187 . In view of law declared in perceptive pronouncements, consistently, by the Apex Court the initial onus is on revenue if explanation is offered by assessee. Once the onus is discharged, it would shift to assessee to prove bonafides, but the appellant/assessee failed to esta .....

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tion created by it has to be applied, which has the effect of shifting the burden of proof. The entire material on record has to be considered keeping in mind the said presumption and a finding be recorded as held in Commissioner of Income Tax v. Jeevan Lal Sah (1994) 205 ITR 244 (SC) The appellant/assessee being the sales tax practitioner, who is conversant to the procedure of filing return under Sales Tax or VAT Act, is supposed to know ill-consequences of filing return of income, concealing t .....

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sessee that he bonafidely failed to disclose the income. Therefore, the contention that there are bonafides on the part of the appellant/assessee in his failure to disclose the income, is not acceptable. In Commissioner of Income Tax, Delhi v. Atul Mohan Bindal (2009) 9 Supreme Court Cases 589 the Apex Court held that even if the non-disclosure is unintentional and inadvertent omission to include income for assessment, if conditions laid down in Section 271 (1) (c) of the Act exist, Assessing Of .....

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er of Income Tax (Appeals) set aside penalty holding that assessee neither concealed details nor furnished inaccurate particulars relying on the decision rendered in CIT v. Ram Commercial Enterprises Ltd., (2000) 246 ITR 568 (Del) , which was approved by the Supreme Court in Dilip N.Shroff Case v. CIT (2007) 6 SCC 329 . In Union of India and others v. Dharamendra Textile Processors and others (2008) 13 SCC 369 , it is held that Dilip N.Shroff s case did not lay down correct law as the difference .....

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dicate that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276-C of the Act. The decision in Union of India and others v. Dharamendra Textile Processors and others (referred supra) has been explained in Union of India v. Rajasthan Spinning and Weaving Mills (2009) 13 Suprem .....

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the explanation offered by him is not substantiated and he fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income has been disclosed by him, for the purposes of Section 271(1)(c), the amount added or disallowed in computing the total income is deemed to represent the concealed income. The penalty spoken of in Section 271(1)(c) is neither criminal nor quasi-criminal but a civil liability; albeit, a strict .....

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he need not disclose the income. As discussed above, the assessee did not prefer any appeal against the assessment order, though there was addition of ₹ 9,16,321/- after initiating proceedings under Section 147 of the Act. However, challenged the penalty order alone on the ground that he bonafidely believed that he need not disclose the particulars of the income from other sources. But no such plea was raised before the Assessing Officer, Commissioner of Income Tax and the Income Tax Appel .....

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passed and revised returns regularised under Section 148 of the Act without any objection from the Revenue. In penalty proceedings, the assessee pleaded that he had submitted the revised returns to buy peace and to come out of vexed litigation. Thereupon, the High Court accepted that the explanation of the assessee was bonafide and upheld the order passed by the Commissioner of Income Tax and set aside the penalty order. The matter carried to the Supreme Court and the Supreme Court also confirme .....

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adhya Pradesh High Court, no law was declared. But, for the first time, such plea was raised, on the other hand in the grounds of appeal, in ground No.8 it is contended that the Tribunal ought to have dropped the penalty proceedings in the similar way as was done for the assessment years between 2003 and 2009 as the facts and circumstances were similar in nature in all the assessment years including 2002-2003. It appears from the ground urged in ground No.8 of grounds of appeal that the assessee .....

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ant/ assessee failed to disclose the income or concealed the income from different sources, filed the return and the same was accepted. However, during search and seizure operation under Section 132 of the Act conducted at Rajiv Gandhi International Airport, Hyderabad, the appellant/assessee was found in possession of ₹ 12,65,900/- and the authorities seized ₹ 12,00,000/-. The authorities also collected the accounts statements from the banks pertaining to the appellant/assessee and f .....

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