TMI Blog2020 (4) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... ER AND SHRI G. MANJUNATHA, HON'BLE ACCOUNTANT MEMBER Assessee by:None Department by: Shri Awangshi Gimson ORDER PER C.N. PRASAD (JM) 1. These appeals are filed by the assessee against different orders of the Learned Commissioner of Income Tax (Appeals) 50, Mumbai [henceforth in short Ld.CIT(A) ] dated 27.09.2017, 18.09.2017 27.09.2017 for the A.Ys. 2010-11,.2008-09 2009-10 respectively. 2. Assessee in all its appeals challenged the order of the Ld.CIT(A) in sustaining the penalty levied u/s. 271(1)(c) of the Act and raised almost identical and similar grounds in all these appeals and particularly for the A.Y. 2010-11 the following grounds were raised: - 1. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in levying a penalty of ₹ 32,64,84,460/- u/s.271(1)(c) of the Income Tax Act 1961 being 300% of the tax sought to be evaded by claiming that the assessee has concealed or furnished inaccurate particulars of its income. 2. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the issue of addition ₹ 26,12,000/-towards alleged additional undisclosed income, without considering the facts and circumstances of the case. 9. On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in directing Assessing Officer to considered loan of ₹ 5,69,00,000/-, without any information and report from Assessing Officer and also stating that such action of Assessing Officer will not be hit by limitation period which is beyond his jurisdiction subject matter of appeal. 3. Inspite of issue of notice none appeared on behalf of the assessee nor any adjournment was sought by the assessee/official liquidator. Therefore, we proceed to dispose off all these appeals on hearing the Ld. DR on merits. 4. Ld. DR referring to the assessment order passed u/s. 143(3) of the Act submits that the Assessing Officer while completing the assessment made various additions/disallowances i.e. addition towards bogus purchases, disallowance u/s. 80IB of the Act, addition towards undisclosed income and expenditure as the assessee could not substantiate the allowability of its claims. Ld. DR submits that Assessing Officer initiated pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, the order would be bad in law. Manu Engg Works 122 TR 300 (Gu), New Sorathia Engg, Co. 282 ITR, 642 (Gui), Padma Ram Bharali 110 ITR 54 (Gau), Thus, basis of satisfaction cannot be altered subsequently by IAC. CIT Vs. Kejriwal Iron Stones, 168 ITR 715 (Raj), 4.3.3 (b) At this stage, it is necessary to understand the distinction between the two charges on the basis of which penalty can be levied, i.e. (1) concealment of particulars of income and (2) furnishing of inaccurate particulars of income. It is the particulars of income which is the common subject matter of both the charges which will be discussed later. The word 'conceal' as per Webster's dictionary means to hide', withdraw, or remove from observation; cover or keep from sight, to keep secret, to avoid disclosing or divulging. That means non disclosure of particulars of income. On the other hand, where particulars are disclosed but such disclosure is not correct, true or accurate, it would amount to furnishing of inaccurate particulars of income. For example, in case of businessmen, if a. particular transaction of sale is not shown in the books, it would amount to concealment of particulars of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he computation of total income, appellant (i) does not offer an explanation or offers an explanation which is found to be false by AO, OR (ii) offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all material facts have been disclosed then, the amount added or disallowed shall be deemed to be income in respect of which particulars are concealed. It is pertinent to note that this Expln. is restricted to a case where appellant is unable to offer an explanation or is unable to substantiate the explanation offered by him in respect of factual detail of the income. Therefore, even this Explanation cannot apply to a case where addition / disallowance have been made by mere rejection of legal claim made by the AO. This view has also been taken by Pune Bench of the Tribunal in the case of Kanbay Software (Supra). Therefore, bonafide of legal claim is not the subject matter of the Expln. 1. In my view, the ratio of the Apex Court in the case of Reliance Petroproducts (supra), to the effect that mere rejection of legal claim would not invite, the penalty would also apply where the charge against the appellant is concealment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was held that an order imposing penalty for failure to register as a dealer. It was held that an order imposing penalty for failure to carry out a statutory obligation is the result of quasi criminal proceedings and penalty would not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. The view taken in the case of Anwar AI has been followed in Khoday Eswarsa and Sons, 83 ITR 369 (SC) in Anantharam Veerasighaiah Co., 123 ITR 457 (SC) in T. Ashok Pai, 292 ITR 11 (SC) and in Dilip N. Shroff. 291 ITR 519. It is to be noted that the provisions of Section 271(1)(c) as considered by the Apex Court in the case Anwar Ali (supra) were identical to the provisions under the old Act of 1922. in the case of Sir Shadilal Sugar General Mills, 168 ITR 705 (SC), it was held that penalty could not be imposed merely because the appellant agreed to be assessed on a particular income. The decision of the Apex Court was based on the provisions as they were originally enacted. The view taken by the division bench in the case of Dilip N. Shroff was doubted an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is given, the burden placed on him will be discharged and perhaps hardly can be, that any presumption rebutted It is not the law and every explanation of the appellant must be accepted. In my view, the explanation of the appellant for avoidance of penalty must be an acceptable explanation. He may not prove what he assets to the hilt positively, but at least material brought on record must show that what he says is reasonably valid. The above views were approved by the Hon'ble Supreme Court in the case of cit Vs. Mussadilal Ram Bharose (1987) 165 ITR 14 (SC). Referring to the judgment of Honble Patna high Court, their Lordships have observed as follows- The Patna High Court emphasized that as to the nature of explanation to be rendered by the assessee, it was plain on principle that it is not the law that the moment any fantastic or unacceptable explanation is given, the burden placed on him will be discharged and presumption rebutted. We agree We further agree that it is not the law that each and every explanation by the assessee must be accepted. It must be acceptable explanation, acceptable to a fact-finding body, Viewed in this perspective, just becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is made to the income but it is established or can be reasonably inferred that assessee's conduct and explanation is bona fide. These are the situations in which the appellant is able to establish his innocence. In such a situation, in accordance with the undisputed scheme of Sec 271(1)(c), neither the penalty was leviable prior to Hon'ble Supreme Court's judgment in the case of Dilip Shroff, nor is it leviable after the Dharmendra Textile Processors's case (supra). 4.3.3(k). There is no change in law so far as first and third scenario visualized above are concerned. The scheme of section 271(1)(c) remains as it is and this scheme clearly requires much more than a mere addition to assessee's income before penalty under the said section can be imposed. The views expressed by their Lordships in Dharmendra Textile Processors's case (supra) do not bring about any radical change in the scheme of Section 271(1)(c) though these views do seek to nullify the Dilip Shroff judgment (supra) which, in the esteemed views of the Large bench did not take into account the correct scheme of things as these were - more particularly post-insertion of Expln I to Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis. It was also pointed out that, in the balance-sheet the property was reflecting under the head Fixed assets and not as investment. The assessee company does not own any other property and the property had been purchased for the purpose of business activities but the same was not found suitable for commercial activities and therefore, the same was sold in the following years. It was also observed that penalty proceedings and the assessment proceedings were separate proceedings Though the disallowance of depreciation has been made in the assessment proceedings but the explanation submitted in the penalty proceedings appears to be satisfactory and bona fide that the assessee had acquired the premises for the business purposes for claim of depreciation. Mere disallowance in the assessment proceedings will not lead to the penalty u/s 271(1)(c). 4.3.3(m). The Hon'ble Delhi High Court held that the AO has rightly brought out in the assessment order that having regard to the short period during which the assessee held the property, which it had acquired with the use of borrowed funds, an intention to make a quick profit on the property deal cannot be ruled out. In this bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation I to section 271(1)(c) automatically comes into operation in respect of any facts material to the computation of the total income of any person, when there is failure to offer any explanation, or an explanation offered is found to be false, or not substantiated as held in the case of CIT Vs A Sreenivas Pai 242 ITR 29 (Kerala), The Honble Kerala High Court further held that the amount added or disallowed in computing the total income is deemed to represent the income in respect of which the particulars have been concealed. As per the provisions of the Explanation 1, the onus to establish that the explanation coffered was bona fide and all facts relating to the same, and material to the computation of income, have been disclosed by him, will be on the person charged with concealment. In this connection, farther reference is made to the case of Western Automobiles (India) Vs CIT (112 ITR 1048) wherein the Honble Jurisdictional High Court of Bombay has held that where the assessee agree to inclusion of amount, onus shifts on assessee in penalty proceedings to show that the amount was not the concealed income. 4.3.4. As regards issue whether penalty can be imposed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income and therefore, penalty on such account is justified. Further, it may be referred that similar issue was examined and decided by me in appeal order dated 27.09.2017 for A.Y. 2009-10 of this appellant only wherein after examining the facts of the case, the issue of imposition of penalty u/s 271(1)(c) was held to be justified and therefore, following the same, the imposition of penalty u/s 271(1)(c) on this part of amount: of ₹ 1,44,000/- is upheld and appellant's ground no.4 related to this issue is to be dismissed. 4.3.7.1 Ground no.5 relates to imposition of penalty @ 300% relates to statement of disclosure u/s 132(4) made during the course of search, but not offered in Returns filed u/s 153AC. 4.3.7.2. I have gone through the penalty order dated 30.03.2014 as well as assessment order dated 27.12.2011 so as to know the correct facts and figures of the issue involved here. As per the assessment order para 3.1, 3.2, 3.3, 3.4 and 3.5, Shri Pujit Agarwal, the Managing Director of M/s Orbit Corporation Ltd., had offered undisclosed income of ₹ 17 crore in the hands of the company. The detail break up of ₹ 17 crore is found in para 3.3 as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount has not been taxed so far, the A.O., after verification of facts and following the procedure of natural justice to the appellant, will take remedial measures to protect the interest of revenue and A.O. shall not be precluded with regard to time period which otherwise is available to the A.O. u/s 153 of the I.T. Act, 1961 r.w.s.250 of the I.T. Act, 1961 while giving effect of the appeal order. 4.3.7.3. Coming back to the facts and figures relating to imposition of penalty with regard to ₹ 26,12,000/-, it is found from para 3.5 of the assessment order that this particular amount was balance remaining amount , which was brought to tax and being added as the additional income of the assessee for A.Y. 2010-11 based on the statement given by him (Mr Pujit Agrawal Managing Director) under oath u/s 132(4) of the I.T Act. Since the income was concealed by the appellant in the Returns filed and was only detected during the course of search, the same was liable for penalty As per the penalty order dated 30.03.2014, this amount pertains to the difference between the additional amount offered to tax and the actual income brought to tax against the same. This amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either at 1006 or 300%% or in between the two. Present case is not a normal case rather it is a search case and where the appellant is found to be guilty of concealing income/furnishing incorrect particulars so as to evade tax even after disclosure, therefore, the A.O. was justified in imposing penalty 300% Accordingly, the appellant's ground of appeal no 1 and this part of ground included in ground nos. 2, 3, 4 and 5 are dismissed. In view of the above, facts and circumstances of the case it is held that the A O. was justified in imposing penalty u/s 271(1)(c) of the I.T. Act, 1961 in A.Y.2010-11. Accordingly, the appellant's ground of appeal for A.Y. 2010-11 is dismissed. 4.3.9. The 6 and last ground of appeal by the appellant is with regard to levying of penalty u/s 271(1)(c) for issues covered in ground nos. 4 and 5 i.e. for the amount of ₹ 1,44,000/- and ₹ 26,12,000/-). According to the appellant, the issue of penalty was to be considered u/s 271AAA and not under section 271(1](c) of the 1.T. Act, 1961. I have considered this issue and given a thought to it. Here, it will be pertinent to reproduce Section 271AAA. Penalty where sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted.] From the above, it is clear that benefit of Section 271AAA will be available to only those assessee/appellant who have met all the three conditions mentioned in sub section 2 of Section 271AAA. In the present case, the appellant has not been able to (i) specify the manner in which such income has been derived; (t) substantiates the manner in which the undisclosed income was derived; and (ii) given proof of payment of the tax, together with interest, if any, in respect of the undisclosed income before filing the Return with respect to the disclosed amount. In fact, it is found, as discussed in earlier para, that the appellant company has not honored its statement which was made during the course of search, despite the fact that the statement was based on incriminating materials as referred above. 6. None of the above findings have been rebutted by the assessee with evidences before the Assessing Officer/Ld.CIT(A). On a careful perusal of the order of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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