TMI Blog2017 (8) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... perty, having been recovered from the allottees by the assessee as a part of the cost, or otherwise charged to them ? This is all the more so as the assessee has claimed and been allowed deduction (in computing its regular profit) in respect of expenditure of its business by way of on money paid to the sellers of land, as "development charges". How does it, in any case, represent a liability of the assessee? In fact, to the extent the assessee has received money, duly entered in its books of account, the same is also covered under clause (i), i.e., besides clause (ii), of Explanation 5A. The facts and circumstances of the case are squarely covered by the said provision, even as observed by the Bench during hearing, to no satisfactory answer by the learned authorised representative. The learned Commissioner of Income-tax (Appeals) has in our view completely misled himself in the matter by not considering a direct provision of law, clearly applicable in the facts and circumstances of the case. In fact, that the Assessing Officer has not referred to it is not relevant inasmuch as the provision of law (section), is to be read along with Explanation appended thereto, with there bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee filed a return of income on August 12, 2009 admitting a total income of ₹ 2,55,13,240 including the additional income of ₹ 1,53,98,570 offered towards development charges . Assessment, accordingly, was made, making an addition of ₹ 13,000 under section 40(a)(ia) to the income as disclosed. The assessee was subsequently issued a show-cause notice for levy of penalty under section 271(1)(c) of the Act, to which it replied as under : . . . In the final accounts of the financial year 2005-06, an amount of ₹ 1,53,98,570 had been debited to 'land development cost' by giving corresponding credit it to 'advances from allottees'. Such debit of ₹ 1,53,98,570 under 'Land Devt. cost' were nothing but on- money payments to various land owners. In other words the final accounts of the year ending March 31, 2006 had wrong credit to an extent of ₹ 1,53,98,570 under the head 'advances from allottees'. In order to come clean before the Department we have now revised our computation of income by disallowing the expenditure of ₹ 1,53,98,570 under the land development cost (also to remove the excess credit under advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery difference between the reported and the assessed income as concealed income, but at the same time, provides the criteria where penalty would be warranted. Penalty is leviable for concealment where an assessee fails to offer any explanation for a difference or offers an explanation, which is found to be false. In the instant case, the amount has been voluntarily offered by the appellant in the return of income under section 153A by withdrawing the land development expenses debited to the profit and loss account. The appellant has been able to offer an explanation which is satisfactory. Further, as submitted by the learned authorised representative taxes have also been paid on the admitted income. The decision of the hon'ble Supreme Court in the case of CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC) is relevant is such a situation. The hon'ble Supreme Court held that penalty is not leviable if the assessee files revised return offering additional income. In that case, the assessee had originally filed returns showing meagre income. When, after search action under section 132, a notice under section 148 was served on him, he filed revised returns showing higher i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 271(1)(c). The hon'ble Income-tax Appellate Tribunal (SB), Vishakhapatnam in the case of Merilyn Shipping and Transports v. Addl. CIT [2012] 16 ITR (Trib) 1 (Visakhapatnam) [SB] ; [2012] 20 taxman.com 244, has held that provisions of section 40(a)(ia) are applicable only to amounts of expenditure payable as on 31st March of the previous year and not to actual amounts paid during the previous year without deduction of TDS. When the addition itself is not sustainable, there is no question of levy of penalty on such addition. The hon'ble Supreme Court in CIT v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC), has also held that disallowance of expenses per se will not amount to furnishing inaccurate particulars of income. Hence, the penalty is not leviable on this addition. In the result, the ground is allowed. Aggrieved, the Revenue is in appeal. 3. Before us, the admitted position was that no return of income had been filed prior to the date of search, and had been only after the issue of notice under section 153A, on August 12, 2009. While the Revenue relied on the findings in assessment and the penalty orders, the learned authorise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g it. While the Revenue maintains that no return of income had been filed prior to August 12, 2009 the learned Commissioner of Income- tax (Appeals) has allowed relief to the assessee (on the regular business profit as per its books of account) on the basis that the same had been duly returned on November 30, 2006. The issue thus turns on a matter of fact, i.e., whether or not the assessee had filed its return of income on November 30, 2006 the only return admittedly furnished by it prior to that under section 153A on August 12, 2009. It is indeed surprising that there should be any ambiguity and, further, continuing up to the second appellate stage, on such a simple matter of fact. Where the assessee has filed a return on November 30, 2006, the same would necessarily be receipted, i.e., carry a receipt number and, besides, would have been processed under section 143(1)(a). Be that as it may, where furnished, there is no question of the assessee being subject to penalty thereon, while, where not, the same is returned for the first time only on August 12, 2009 even as the same is only as per its books of account, found and seized in search. Accordingly, the assessee having not furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no return has been filed on November 30, 2006 allowing credit for the advance tax. 4.2 Next, we may discuss the aspect of levy of penalty on the sum of ₹ 153.99 lakhs offered as additional income per section 153A return. Explanation 5A to section 271(1)(c) of the Act reads as under : Explanation 5A.-Where in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of,- (i) any money, bullion, jewellery or other valuable article or thing (hereinafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year ; or (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of the search and,- (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein ; or (b) the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction (in computing its regular profit) in respect of expenditure of its business by way of on money paid to the sellers of land, as development charges . How does it, in any case, represent a liability of the assessee? In fact, to the extent the assessee has received money, duly entered in its books of account, the same is also covered under clause (i), i.e., besides clause (ii), of Explanation 5A. The facts and circumstances of the case are squarely covered by the said provision, even as observed by the Bench during hearing, to no satisfactory answer by the learned authorised representative. The learned Commissioner of Income-tax (Appeals) has in our view completely misled himself in the matter by not considering a direct provision of law, clearly applicable in the facts and circumstances of the case. In fact, that the Assessing Officer has not referred to it is not relevant inasmuch as the provision of law (section), is to be read along with Explanation appended thereto, with there being no estoppel against law (also refer : CIT v. Durga Prasad More [1971] 82 ITR 540 (SC)). The scope for the non-application of the said Explanation is only where the assessee does not admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of any finding by any authority. The matter would accordingly have to go back to the file of the Assessing Officer to determine as a matter of fact whether the amount disallowed outstands, in whole or in part, as at the year end, so that to the extent it outstands, no penalty would be exigible. Where, and to the extent not, an absence of any explanation would justify the levy of penalty under section 271(1)(c). We decide accordingly. 4.4 Before parting with our order, we may also address the assessee's charge of even the initiation of penalty proceedings being bad in law. In this regard, it may suffice to refer to the following observations by the hon'ble apex court in MAK Data (P.) Ltd. (supra), a decision rendered by it with reference to and in fact applying its earlier decisions, as in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) and CIT v. Atul Mohan Bindal [2009] 317 ITR 1 (SC) (headnote of 358 ITR) : Explanation 1 to section 271(1)(c) of the Income-tax Act, 1961 raises a presumption of concealment, when a difference is noticed by the Assessing Officer, between the reported and assessed income. The burden is then on the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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