TMI Blog2015 (1) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the assessee to furnish evidence to support the claim made in the return of income and which has no relation whatsoever to any agreement between revenue and the assessee on this point. In the case on hand, the penalty has not been levied because the addition was an agreed addition but because the assessee could not furnish any evidence to substantiate its claim of having incurred the expenditure, thus we are of the considered view that the decision of the learned CIT(A) in confirming the levy of penalty u/s.271(1)(c) of the Act on this point does not call for any interference by us. Penalty levied with respect to the disallowance of the claim of exemption under section 54B - Held that:- It is not in dispute that the assessee had not been able to furnish any evidence to substantiate the claim of reinvestment to the extent of ₹ 3,68,14,038 made by him. We find that the disallowance of ₹ 3,68,14,038 was made only because the assessee could not substantiate the claim of reinvestment by producing any material evidence in this regard. The contention that the assessee is unable to produce any evidence because of litigation in the property is hard to accept. As pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as there was no dispute with respect to those items of income declared. Thus the penalty leviable u/s.271(1)(c) of the Act should be on the assessed income, as reduced by commission income and other income, if any, declared in the return of income in respect of which there is no dispute. The Assessing Officer is directed accordingly. - I.T.A. Nos. 859 & 860/Bang/2012 - - - Dated:- 13-1-2015 - SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER Appellant By: Shri P. Dinesh, Advocate. Respondent By: Dr. P.K. Srihari, Addl. CIT. O R D E R Per Shri Jason P. Boaz, A.M.: These two appeals by the assessee, are directed against the orders of the Commissioner of Income Tax (Appeals)-III, Bangalore dt.24.2.2012 and 2.3.2012 for Assessment Years 2006-07 and 2007-08 respectively, challenging the confirmation of orders of the Assessing Officer levying penalty under section 271(1)(c) of the Income Tax Act, 1961 (in short 'the Act') for the said assessment years. These appeals were heard together and are therefore being disposed off by way of this combined order in seriatum. ITA No.859/Bang/2012 Assessee's appeal for A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various judicial pronouncements relied by the appellant. 9. For these and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal may be allowed. 3.0 The facts and circumstances of the case under which penalty under section 271(1)(c) of the Act was levied on the assessee by the Assessing Officer are, briefly, as under :- 3.1 The assessee is an individual deriving income from agriculture and is also engaged in the business of real estate. For Assessment Year 2006-07, the assessee filed the return of income on 31.3.2007 declaring income of ₹ 17,97,490 and agricultural income of ₹ 4,25,621. In this assessment period, the assessee sold agricultural land and declared Long Term Capital Gains (LTCG) thereon; apart from declaring income / loss from other heads such as house property, business and other sources. The assessment was completed under section 143(3) of the Act by order dt.15.12.2008 wherein the income of the assessee was determined at ₹ 5,45,59,686. Penalty proceedings under section 271(1)(c) of the Act were simultaneously initiated. The assessment was completed making the following additions / disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not used the land for agricultural purposes and also the land was held by the assessee from August, 2004 to March, 2005, i.e. for a period of less than 2 years. 3.4 Consequent to the directions of the CIT under section 263 of the Act, the Assessing Officer passed an order under section 143(3) r.w.s. 263 of the Act dt.28.12.2011 assessing the total income of the assessee at ₹ 7,10,38,410 after incorporating the issues raised in the order under section 263 of the Act. The A.O. also simultaneously initiated penalty proceedings under section 271(1)(c) of the Act. 3.5 Aggrieved by the order of assessment under section 143(3) r.w.s. 263 of the Act dt.28.12.2011, the assessee preferred an appeal before the CIT (Appeals) III, Bangalore. The learned CIT (Appeals) disposed off this appeal by order dt.31.8.2012, (i) Confirming the income from capital gains due to excess claim of cost of acquisition to the extent of ₹ 20,50,216 and (ii) Deleting the disallowance of ₹ 6,70,40,704 towards the claim of exemption under section 54B of the Act, holding that the assessee was entitled to this exemption, which has been unjustifiably denied. 3.6 Aggrieved by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is not an essential ingredient for attracting penalty u/s. 271(1)(c) of the Act. In this view of the matter, this ground of appeal is not sustainable and is accordingly dismissed. 6. Ground Nos.3 4 : Penalty on cost of improvement. 6.1 A plain reading of these grounds of appeal seem to indicate that both these grounds contradict each other. Whereas Ground No.3 reads that the assessee could not have incurred the expenditure, of ₹ 1,56,98,151 on improvement of land; Ground No.4 reads that the expenditure claimed is not unreasonable, considering the extent of the land involved and therefore the addition made was unwarranted. 6.2 Be that as it may, the facts of the matter are that the assessee had sold agricultural land during the year under consideration and had claimed cost of improvement of ₹ 1,56,98,159 as deduction from the sale consideration. However, as the assessee could not furnish any evidence for the claim, the amount was disallowed; which disallowance as per the Assessing Officer was accepted by the assessee. The Assessing Officer on examination of the assessee's claim was of the view that the assessee was unable to substantiate the claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus of proving the claim of expenditure being incurred would entail levy of penalty u/s. 271(1)(c) of the Act, it is settled principle that an addition or/ disallowance resulting in increase to the income of the assessee, raises a presumption of concealment of income. It is a rebuttable presumption, which the assessee can rebut by furnishing material evidence to establish its claim. Explanation 1 to section 271(1)(c) of the Act provides that, if a person fails to offer an explanation or the explanation offered by such person is found to be false or the explanation put forth 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 have not been disclosed by him, for the purposes of section 271(1)(c) of the Act, the amount so added or disallowed in computing the assessee's total income is deemed to represent the concealed income. It is for the assessee to furnish material to establish that the assessee has not concealed income or has not furnished inaccurate particulars of income. In the absence of any such evidence, the presumption of concealment of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case on hand, the penalty has not been levied because the addition was an agreed addition but because the assessee could not furnish any evidence to substantiate its claim of having incurred the expenditure. Hence, we find that the facts of the cited case are different from that of the case on hand and would not be applicable. 6.4.6 We find on perusal of the cited case of K.P. Sampath Reddy (supra) of the Hon'ble Karnataka High Court, that the decision in fact goes against the assessee. In that case the Hon'ble High Court upheld the levy of penalty u/s. 271(1)(c) of the Act observing at para 6 thereof that, 6. We are constrained to reject the assessee's contention. We are pained tonote that the Tribunal completely ignored the assessment order which was not based on any concession from the assessee. Concealment of income in the return filed by the assessee is a glaring fact in the instant case. It is not possible to infer any agreement by the Revenue, either in clear terms or by necessary implication, to act on the basis of the assessee's letter. Assessee has to thank himself that the ITO levied the minimum penalty only. In the case on hand also, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us was that there were litigations in respect of property, due to which the assessee was unable to furnish any evidence in respect of the reinvestment claimed and that the non-furnishing of evidence in this regard was due to genuine hardship and reasonable causes and therefore the levy of penalty was not tenable. 7.4.1 We have heard the rival contentions and have perused and carefully considered the material brought on record. At this stage, it would be necessary to put the facts in proper perspective for a proper appreciation of this issue before us. The Assessing Officer had originally accepted the contention of the assessee that he is eligible for exemption under section 54B of the Act, but, however disallowed the assessee's claim of exemption to the extent of ₹ 3,68,14,038 for want of any evidence of reinvestment claimed being furnished and allowed exemption under section 54B of the Act to the extent of ₹ 6,70,40,704. The CIT, Bangalore-III invoked the revisionary powers under section 263 of the Act to reverse the decision to allow the exemption under section 54B of the Act amounting to ₹ 6,70,40,704, on the grounds that the assessee was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having incurred the expenditure on reinvestment. 7.4.3 On the issue of whether the failure to discharge the onus of proving the claim of expenditure would entail levy of penalty u/s. 271(1)(c) of the Act; it is settled principle that an addition made to the income or a disallowance of a claim resulting in addition to income raises the presumption of concealment of income. This is a rebuttable presumption, which the assessee can do by furnishing details and evidence to establish the claim in question. Explanation 1 to section 271(1)(c) of the Act provides that if that person fails to offer an explanation or the explanation offered by such person is found to be false or the explanation offered by person is not substantiated and he fails to prove that the explanation offered is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, for the purposes of section 271(1)(c) of the Act, the amount added or disallowed in computing the total income is deemed to represent the concealed income. It is for the assessee to furnish evidence to establish that he / it has not concealed income or furnished inaccurate par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. It is not in dispute that the claim for deduction of ₹ 1,50,000 on account of interest on housing loan made in the return of income was admittedly erroneous and this erroneous claim was detected by the Assessing Officer in the course of assessment proceedings. For the reasons discussed and the reasoning given earlier in this order, while dealing the earlier grounds of appeal (supra), the levy of penalty u/s. 271(1)(c) of the Act on this issue is justified. In this view of the matter, we are of the opinion that the decision of the learned CIT (Appeals) on this issue does not require any interference. Consequently, Ground No.6 of the assessee's appeal is dismissed. 9. In the result, the assessee's appeal for A.Y. 2006-07 is dismissed. Assessee's appeal in ITA No.860/Bang/2012 for A.Y. 2008-09. 10. The grounds raised by the assessee in this appeal are as under :- 1. On the facts and in the circumstances of the case, the learned CIT (Appeals) erred in upholding the impugned order u/s.271(1)(c) of the Act, in the manner in which it was done. 2. The learned CIT (Appeals) ought to have appreciated that there was no mala fide intention on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2007-08. However, in the return of income filed on 30.6.2008, after the survey under section 133A of the Act, the assessee had declared income of ₹ 46.16 lakhs; out of which ₹ 30,36,787 was towards income from business and ₹ 15,79,786 was towards income from capital gains. 11.3 Subsequently on 11.2.2009, a survey under section 133A of the Act was carried out at the premises of Sri Krishnappa. In the course of this survey, it was determined that the activity of layout formation constituted business activity and in the absence of details of expenditure incurred, the income from the sale of land was determined at ₹ 200 per sq. ft. sold. Accordingly, the income from the layout formation was determined at ₹ 1,62,72,800 for the period relevant to Assessment Year 2007-08. It was also accepted that this income will be shown as the income of both the assessee and Sri Krishnappa at 50% each in these respective hands. Therefore 50% of this income i.e. ₹ 84,56,800 was income of the assessee. 11.4 The Assessing Officer completed the assessment in the case of the assessee, based on the findings made during the survey action in the case of Sri Kri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess i.e. ₹ 30,36,787, which was declared by the assessee, ought to have been taken into consideration and excluded while arriving at the figure of concealed income. 11.6 Per contra, the learned Departmental Representative supported the orders of the authorities below in levying and upholding the levy of penalty u/s.271(1)(c) of the Act in the case on hand for Assessment Year 2007-08. 11.7.1 We have heard the rival contentions and perused and carefully considered the submissions made and the material on record. Admittedly, the assessee was involved in the activity of layout formation in the Singapore Layout with one Sri Krishnappa and the income earned form this activity of layout formation, in the period under consideration i.e. Assessment Year 2007-08, was to be assessed equally at 50% thereof in the hands of the assessee and Sri Krishnappa. Since the details of expenditure incurred in this layout formation activity was admittedly not maintained, it was accepted that the income may be assessed at an agreed rate of ₹ 200 per sq. ft. of land sold. 11.7.2 Though the assessee has raised as many as seven grounds, the only issue in dispute was whether the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnish evidence to establish that he/she/it has not concealed income or furnished inaccurate particulars of income. In the absence of any such evidence, the presumption of concealment of income or furnishing of inaccurate particulars of income gets sustained. 11.7.5 In the case on hand, the assessee's decision to declare the income from layout formation in the return of income filed on 30.6.2008 as income from capital gain was a conscious one. The assessee has not been able to furnish any explanation, supported by material evidence, for the same and therefore, in our view, has not been able to rebut the presumption of concealment. In this view of the matter, we are of the considered opinion that the learned CIT (Appeals) was correct in upholding the action of the Assessing Officer in levying penalty u/s.271(1)(c) of the Act. 11.8.1 As regards the issue of the quantum of income to be considered for levy of penalty u/s. 271(1)(c) of the Act, in our view, the Assessing Officer is wrong in considering the entire assessed income for levy of penalty. The only issue of dispute is the income from Singapore Layout formation; whether the income is to be assessed as business inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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