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Grass Field Farms and Resorts P. Ltd. Versus Deputy Commissioner of Income-Tax

2016 (11) TMI 792 - RAJASTHAN HIGH COURT

Penalty imposed under section 271(1)(c) - Unexplained investment under section 69B - business income claim rejected - Surrender of income - Held that:- There are not only documents of several unrecorded purchases coupled with the statements of not only the employees and key persons who had purchased the properties but also of the three directors accepting in unequivocal terms the undisclosed investment and detailing by way of separate annexures, the manner in which undisclosed investment was mad .....

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osed by the Assessing Officer and has rightly been upheld by both the appellate authorities in unison based on evidence and is a finding of fact. - Decided against assessee - Income Tax Appeal No. 60 of 2016 - Dated:- 1-6-2016 - M. N. Bhandari And J. K. Ranka, JJ. For the Appellant : Gunjan Pathak JUDGMENT J. K. Ranka, J. 1. The instant appeal at the instance of the assessee under section 260A of the Income-tax Act, 1961, is directed against the order dated October 27, 2015 passed by the Income- .....

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ch continued up to February 28, 2008 at the business premises of the appellant and during the survey operation, certain incriminating documents were found and impounded under section 133A(3)(ia) of the Income-tax Act, 1961. The survey resulted into undisclosed investment in purchase of agricultural lands and other properties, which was noticed and admitted by the directors of the appellant. It was noticed on perusal of the incriminating documents found at the site office of the company located a .....

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ts of Nagesh Bhaskar and Ram Kishore Jat were provided to Sunil Bansal, director, and thereafter statements of Sunil Bansal, one of the directors of the appellant, were recorded and the statements of Sunil Bansal were confirmed by Atma Ram Gupta and Vimal Singhvi the other two directors, wherein surrender was sought to be made of undisclosed investment and offering income. A show-cause notice was issued during the course of regular assessment proceedings on March 12, 2008, bringing it to the not .....

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tial amounts making total surrender to the tune of ₹ 15 crores, including the assessment year under appeal. 3. Taking into consideration the revised return filed by the assessee, the Assessing Officer added the said amount of ₹ 3,02,33,672, and thus computed the total income at ₹ 3,04,21,370. 4. An appeal came to be filed by the assessee objecting to the addition being made as unexplained investment under section 69B of the Act and not as "business income" as claimed .....

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the Act. The said appellate order became final and was not challenged by the appellant or by the Revenue. Since the addition was made in the assessment order, notice under section 271(1)(c) of the Act was also issued along with the assessment order, and a show-cause notice was issued as to why the penalty proceedings under section 271(1)(c) of the Act may not be initiated for concealment and furnishing inaccurate particulars in respect of the surrendered income. 5. After the appellate order havi .....

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6, 2008. (ii) The learned Assessing Officer's observation that the revised return filed by the assessee was not voluntary but as a result of survey operation, has also been rejected by the Hon'ble Commissioner of Income-tax (Appeals) Jaipur. After order of the learned Commissioner of Income-tax (Appeals), Jaipur there is no concealed income and no penalty can be imposed. You are therefore requested to kindly drop the penalty proceedings." However, the Assessing Officer vide order da .....

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(Appeals), who also upheld the imposition of penalty taking into consideration not only the various submissions of the appellant, but also taking into consideration the statements, the material and judgments. 7. The assessee further assailed the said order of the Commissioner of Income-tax (Appeals) before the Tribunal. The matter was heard by the Bench of the Tribunal, however, while the learned Accountant Member (Shri B. R. Jain) in his order taking into consideration the peculiar situation, o .....

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that there being no material or documentary evidence on record to show payment of any "on money", while he found that there was ample evidence on record in the shape of incriminating documents and clear working of the "on money" which was noticed by the survey team. He further noticed that the statements were recorded of two persons and also directors who themselves calculated the concealed income and filed revised return on March 27, 2008. He also came to the conclusion that .....

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uliar facts and circumstances of this case, there is any justification in sustenance of penalty imposed under section 271(1)(c) of the Act ?" Learned Vice-President of the Tribunal (Shri G.D. Agrawal) who acting as a Third Member, heard the matter again and held as under : "35. However, the facts of the assessee's case are altogether different. In the case under consideration before me, as already noted, there was survey at the assessee's premises. During the course of sur vey, .....

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n the books of account. He, with the help of those documents, prepared a detailed chart and worked out the unrecorded investment in the land by the assessee-company in three assessment years. The revised return was filed to include those unexplained investment in the purchase of agricultural land. Therefore, it is a case where the revised return is filed by the assessee after the detection of understatement of purchase price by the survey authorities. It is not a case where the revised return wa .....

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The purchase price of the land was recorded at a lesser value in the regular books of account. These facts were detected by the Revenue as a result of survey at the assessee's premises. During the course of survey, the director of the company admitted these facts. Thus, it is a clear case where the assessee furnished incorrect particulars in the original return of income with regard to purchase price of agricultural land, value of closing stock as well as the business income. The revised ret .....

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bunal, discarded the finding of the learned Accountant Member that there was no incriminating document or no documentary evidence on record to show payment of any "on money". Thus, penalty was upheld. 8. Learned counsel for the appellant contended that statements of two persons were recorded, however, since they were employees of the company, they had no authority to give any statement. He also supported the findings of the learned Accountant Member that except statements recorded, the .....

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proceedings and once there was subjective offer/surrender, the Assessing Officer was precluded from initiating the proceedings under section 271(1)(c) of the Act. He further contended that merely making of surrender in a peculiar situation and there being no documentary evidence on record to show payment of any "on money" or to suggest any unexplained investment in stock, and even the surrender was tax neutral as there was no tax when there was no sale, and there was no occasion for th .....

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Mittal [2000] 241 ITR 124 (MP) ; CIT v. Punjab Tyres [1986] 162 ITR 517 (MP) ; CIT v. Suraj Bhan [2007] 294 ITR 481 (P&H) ; CIT v. S. Khader Khan Son [2013] 352 ITR 480 (SC) ; and Paul Mathews and Sons v. CIT [2003] 263 ITR 101 (Ker). 9. We have heard the learned counsel for the assessee and have perused the orders passed by the learned Members of the Bench including the Third Member and the other orders. We have already narrated the seriatum of facts in the beginning of the order, and we ne .....

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at 10 months ago his family members had sold land in village Nandlalpura, Tehsil Phagi. He had admitted of having received payments as follows : * * * * * * * * * Statement of Nagesh Bhaskar is also being reproduced hereunder : * * * * * * * * *1 Subsequently this statement of Sh. Nagesh Bhaskar was confronted with Sh. Ramkishore, seller of land, resident of Mehala. He confirmed the statement of Sh. Nagesh Bhaskar as follows : * * * * * * * * *1 Relevant portion of statement of Mahesh Kumar Gupt .....

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the company, and it would also be relevant to observe his statement, which is reproduced hereunder : * * * * * * * * *1 On perusal of the statements of various persons including Sunil Bansal and confirmation by the other two directors, who were also present during the course of statements, it was categorically accepted and agreed by the three directors, which had also been placed on record as annexure "A", * Portions in vernacular not printed here-Ed. stating about undisclosed investme .....

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ell, who were also present at the time of statements who took into consideration the categorical statements of the various persons/ associates of the assessee and the directors clearly admitting about the purchase through these key persons/associates. It is only when faced with the statements as also the unrecorded/recorded documents found at the business premises that the assessee came with a surrender. It is also appropriate to observe that though the statements offering surrender was made by .....

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imagination can be said to be a voluntary act, but after detection. 11. We would also like to refer to the observation of the learned Accountant Member (Shri B.R. Jain) of the Tribunal, where in para 13 he observes- "No documentary evidence in the shape of loose papers or any other agreements reflecting payment as "on money" is available on record of the assessing authority", and another finding at page 15 of the impugned order "The assessing authority in the penalty pro .....

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including the Tribunal. We have reproduced the statements of various persons/directors just to show the extent of loose papers and incriminating documents found and admitted by the appellants to counter the perverse finding of the learned Accountant Member of the Tribunal. 12. On the contrary, not only the Assessing Officer but the learned Commissioner of Income-tax (Appeals) as well as the learned Judicial Member and the learned Third Member have categorically found, as reproduced hereinbefore, .....

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assessee failed to discharge the onus laid down upon it, and did not offer any cogent explanation except a small letter dated March 2, 2010 which has been reproduced in para 5 hereinbefore, during the penalty proceedings before the Assessing Officer, there is no option but to uphold the findings of fact by all the three Authorities confirming the levy of penalty. Even otherwise, the breach of civil obligation which attracts a penalty under the provisions of an Act would immediately attract the l .....

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the assessee, and it is only as a result of survey that a clear picture came out on the surface. Admittedly, the statements of the persons or/and the three directors have never been retracted either during the assessment proceedings or during the penalty proceedings at any stage. 14. The Madras High Court in the case of Late M. S. Mohammed Marzook v. ITO [2006] 283 ITR 254 (Mad) held that in a case where original return was filed disclosing an income and consequent to a search proceeding if a r .....

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dentally without any intention warranting deletion of penalty. On the other hand, the Appellate Tribunal found that the reasons assigned by the Assessing Officer to hold that the assessee had concealed the income are genuine and accordingly, confirmed the penalty. The Madras High Court further held that it is settled law that once the authorities have arrived at a subjective satisfaction under the facts and circumstances of the case, it may not be proper for the court to enter upon the merits of .....

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e Madras High Court in the case of CIT v. J. K. A. Subramania Chettiar [1977] 110 ITR 602 (Mad), had an occasion to consider a case under section 271(1)(c) of the Act where a revised return was filed showing higher income, still higher income was assessed by the Assessing Officer, and in the said case the assessee had filed original return disclosing an income of ₹ 27,556. The assessee filed a second return of income for the assessment year 1963-64 disclosing a total income of ₹ 75,0 .....

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the case of Addl. CIT v. Radhey Shyam [1980] 123 ITR 125 (All), held that even filing of revised return is of no avail and benefit cannot be claimed by a person filing original return knowing it to be false and penalty was leviable on the basis of original return. 17. The apex court in a recent judgment in the case of MAK Data P. Ltd. v. CIT [2013] 358 ITR 593 (SC), had an occasion to consider a case where the original return was filed disclosing an income of ₹ 16,17,040 along with tax au .....

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concern of the assessee). The Assessing Officer then proceeded to seek information from the assessee and issued a show-cause notice dated October 26, 2006. By the show-cause notice, the Assessing Officer sought specific information regarding the documents pertaining to share applications found in the course of survey, particularly, blank transfer deeds signed by persons, who had applied for the shares. Reply to the show- cause notice was filed on November 22, 2006, in which the assessee made an .....

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oney added the said amount of ₹ 40,74,000 and brought to tax as "income from other sources" and assessed the total income at ₹ 57,56,700. The penalty proceedings were initiated for concealment of income and not furnishing true particulars of its income under section 271(1)(c) of the Act. The Assessing Officer imposed penalty under section 271(1)(c) at ₹ 14,61,547 which was upheld by the Commissioner of Income-tax (Appeals), however, was deleted by the Tribunal. The De .....

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peace", "avoid litigation", "amicable settlement", etc., was of the opinion that the Explanation to section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question .....

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ellant-assessee from the mischief of penal proceedings. Law does not provide that when an asses see makes a voluntary disclosure of his concealed income, he had to be absolved from penalty. Holding so, the judgment of the Tribunal was set aside and the appeal filed by the Revenue was allowed. The apex court further observed as under (page 598 of 358 ITR) : "We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view .....

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mpounded in the course of survey proceedings under section 133A conducted on December 16, 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 .....

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271 read with section 274 of the Income-tax Act, 1961. The Assessing Officer has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the Assessing Officer is not required to record his satisfaction in a particular manner or reduce it into writing. The scope of section 271(1)(c) has also been elaborately discussed by this court in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) ; [2008] 13 SCC 369 and CIT v. .....

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uments of several unrecorded purchases coupled with the statements of not only the employees and key persons who had purchased the properties but also of the three directors accepting in unequivocal terms the undisclosed investment and detailing by way of separate annexures, the manner in which undisclosed investment was made year-wise. Therefore, the judgment of MAK Data P. Ltd. (supra) is squarely applicable. 19. Taking into consideration the above facts and circumstances, and particularly whe .....

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he said assessee were looked after for a number of years by the law agency division of the Syndicate Bank, Manipal, which was authorised to file the returns of income before the tax authorities representing the assessee. On a return having been filed, the Revenue being dissatisfied called for better particulars of investments made by the said assessee whereupon a revised return was filed on January 12, 1990 furnishing all the requisite particulars to the Department. A second revised return was f .....

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n has to be considered from a different angle. The said judgment is inapplicable as the Assessing Officer in the penalty proceedings has considered the material again and has come to a definite conclusion about concealment of income. 22. In CIT v. Anwar Ali (supra), the issue was on different proposition. It held that though addition made in the quantum proceedings is good evidence, but before penalty can be imposed the entirety of the circumstances must reasonably point to the conclusion that t .....

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count. 23. The case of CIT v. Suresh Chandra Mittal (supra), relied upon by the learned counsel for the appellant, is yet again on a different proposition as the apex court found that the Department has not discharged its burden of proving concealment and has simply rested its conclusion on the act of voluntary surrender done by the assessee in good faith. However, we have already noticed the judgment in the case of Mak Data P. Ltd. (supra), which is applicable to the facts of the instant case, .....

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