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The Income- Tax Act, 1995
C. A. Rajendran vs Union Of India & Ors on 29 September, 1967
The A.C.I.T. vs Sh. A.R. Dahiya on 8 October, 2003
Asstt. Cit vs Avtar Singh on 1 June, 2003
Section 80P(2)(a)(iii) in The Income- Tax Act, 1995

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Income Tax Appellate Tribunal - Chandigarh
Sh. Bhagwan Dass Garg, Ludhiana vs Department Of Income Tax on 9 September, 2013
           IN THE INCOME TAX APPELLATE TRIBUNAL
             CHANDIGARH BENCHES 'A CHANDIGARH


           BEFORE SHR I BHAVNESH SAINI, JUDIC IAL MEMBER
             AND SHRI T.R. SOOD, ACOCUNTANT MEMBER


                              ITA No. 1253/CHD/2011
                             Assessment Year: 2007-08


The JCIT(OSD),                   Vs      Shri Bhagwan Dass Garg,
Central Circle-II,                       Dugri, Ludhiana
Ludhiana

PAN No. AECPG8745E

(Appellant)                                          (Respondent)


                     Appellant By            : Shri Akilesh Gupta
                     Respondent By           : Shri Sudhir Sehgal


                      Date of hearing       : 09.09.2013
                      Date of Pronouncement : 13.09.2013


                                        ORDER

PER BHAVNESH SAINI, JM This Departmental appeal is directed against the order of Ld. CIT(A)-I Ludhiana dated 3.10.2011 for assessment year 2007-08 challenging the cancellation of penalty u/s 271(1) (c) of the Income Tax Act.

2. Briefl y, the facts of the case are that the assessee was searched u/s 132 of the Act on 10.8.2006 and had disclosed an amount of Rs. 45 lakhs in his statement recorded u/s 132(4). However, the said amount was not disclosed in the return of income field on 3.9.2007 which was filed at Rs. 11,77,992/-. During the course of assessment proceedings and just before passing of the assessment order dated 31.12.008, the Assessing Officer confronted the assessee with the issue of non disclosure of the amount surrendered u/s 132(4) of the Act. 2 The assessee filed a revised return on 26.12.2008 including therein the impugned amount of Rs. 45 lakhs and also submitted that amounts surrendered could not be disclosed in the return of income on account of unintentional mistake as the necessary tax along with interest on the disclosed income has been paid in the due course before filing the return of income. The Assessing Officer concluded that the assessee disclosed the surrendered amount onl y after being confronted, therefore, immunit y from concealment would not be given. Apart form this issue, the Assessing Officer imposed penalt y in respect of addition made on account of sale of plot of land for Rs. 77,600/- whereas the Assessing Officer has estimated the sale price at Rs. 2,16,350/-. The addition made by the Assessing Officer was confirmed by Ld. C IT (Central) in the order passed u/s 264 of the Income Tax Act. The Assessing Officer rejected the assessee's argument that he has sold the impugned plot at a particular price on the ground that the same was not substantiated and there was huge variation in the sale rates. The Assessing Officer rejected the contention of the assessee by holding that assessee has shown the sale consideration at as lower price.

3. During the course of appellate proceedings, the assessee challenged the levy of penalt y on income surrendered at Rs. 45 lakhs and addition in respect of Rahon Road Property in a sale of Rs. 1,38,750/-. The comments of the Assessing Officer were called for and the Assessing Officer in his comments reiterated the stand taken in the assessment order. The Assessing Officer submitted that the assessee despite making surrender of Rs. 45 lakhs in the said statement u/s 132(4) of the Act has not made surrender in the original return of income. It was disclosed in the revised return onl y. Therefore, the revised return cannot be treated as voluntary and sue motto. The assessee in the rejoinders submitted that assessee has already deposited the tax on the surrendered amount of Rs. 45 lakhs on due dates which could not be shown in the original return due to some misimpression on the part of the assessee's 3 counsel. The assessee never backed out or retracted from the surrender. The assessee filed copy of the capital account and cash flow statement with the Assessing Officer on 16.12.2008 though the matter was discussed with the Assessing Officer of surrendered amount onl y on 24.12.2008. The assessee, therefore, never intended to conceal any particulars of income.

4. The Ld. CIT(A) considered the explanation of the assessee, deleted the penalt y with regard to the surrendered amount of Rs. 45 lakhs. His findings in para 5 of the appellate order are reproduced as under:-

"5. I have considered the facts of the case and it becomes apparent that the assessee having made the disclosure of Rs. 45 Lacs paid the due taxes in the form of advance tax and did not make any specific retraction, but failed to include the disclosed amount in the return of income leading to claim of refund of Rs. 11,96,888/-. The issue of non disclosure did not come to the focus of the AO till 24/12/2008 when specific query on disclosure was raised. The assessee responded by filing a revised return on 26/12/2008 by including the disclosure amount or Rs. 45 lacs. The AR is basically claiming that the mistake of not disclosing the surrendered amount in the return of income was intentional and not intended to retract the disclosure made. It has further been established that the copy of capital account and cash flow statement was filed with the A.O. on 16/12/2008 though the assessee was confronted on the issue of non disclosure by the AO on 24/12/2008. The analysis of above detailed facts and sequence of events shows that there has been a bonafide omission on the part of the assessee / assessee's counsel and the same has been rectified by filing a revised return which is considered valid u/s 139(5). It is important to appreciate here the state of mind of the assessee at the time of filing of the original return which is clearly intended to owner the disclosure made during the course of search operation as necessary taxes had been paid and no retraction had been made. Further necessary entries in the books of account evidencing the fact of disclosure of Rs. 45 Lacs had 4 also been made and submitted during the course of assessment proceeding even before any issue about this raised by the assessee. This means that and unintentional mistake that had crept in while filing the return of income had been rectified within the time permissible as per provision of section 139(5). The revised return so filed can not be ignored by the AO in determining the assessee's liability for imposition of penalty u/s 271(1)(c). Since there is no difference between assessed income and valid revised return filed by the assessee, there is no case for imposition of penalty. As such the same is deleted."

4.1 With regard to the levy of penalt y on addition of Rs. 1,38,750/-, it was submitted that penalt y was imposed merel y on estimate of income. The Assessing Officer rejected the assessee's contention on the reason that the plot though had not been sold at the price lower than the price fixed by the Revenue authorities, the same was not applicable to the assessee as income from the sale of plot was shown under the head 'business income'. Further, for some of the plots the rates are very lower and the contention of the assessee was already been rejected by the CIT(A) u/s 264 of the Income Tax Act. The assessee challenged the penalty order before CIT(A) and it was submitted that penalt y's imposed without arising any reason. The assessee has purchased land at Rahon Road Ludhiana from 9.2.2004 onwards up to financial year 2006-07 and development of the above land had been carried out during the above period. The total cost of land available for sale measuring 13100 square yards after leaving space roads and parking etc. including estimated development charges works out at Rs. 721/- per square yard. During the year under consideration, the assessee had sold four plots measuring 982.5 square yards for Rs. 7,86,000/- on rates varying from Rs. 456/- per square yard to Rs. 1056/- per square yard and earned net profit of Rs. 77,600/-. The above profit has been disclosed in the return under the head 'business income'. The sale rates are supported by sale deeds. The irregularities in the shape of the land had been attended to and due to 5 various reasons there was difference in the rates. The judgment of the Hon'ble Supreme Court in the vase of K.P.Varghese Vs ITO 131 ITR 597 was relied on in which it was held that it is onl y the registered value of any propert y which has to be considered and the onus of establishing that any amount was received over and above the amount declared is always on the Revenue. It was further submitted that addition is merel y on the estimate basis so it is not a conclusive evidence to prove that assessee has concealed the particulars of income or filed inaccurate particulars of income. No evidence was found during the course of search for levy of the penalt y. It was, therefore, submitted that levy of penalt y may also be cancelled. The Ld. C IT(A) on consideration of the submissions of the assessee, cancelled the penalt y under this head also. The findings of the Ld. CIT(A) in para 8 of the appellate order are reproduced below:-

"8. I have considered the facts of the case and the basis of penalty imposed by the AO on the issue. It is a matter of fact that the addition made is purely on estimate basis and nothing had been brought on record by the AO which could be termed as evidence to reject the sale price as recorded in the registered document. The AO rejected the various contentions of the appellant for heavy sold the plot at price lower than the normally expected price by recording his own conclusions and finally proceeding to make the addition by substituting an estimated sale price as against the price recorded in the registered document which was not below the price fixed by the revenue authorities. The addition so made got confirmed before the CIT(C) in proceedings u/s 264, but the fact remains that the AO even during the penalty proceedings has merely relied upon the addition made and sustained and not brought any evidence to hold that the plot in question had actually been sold at price other than the registered price. The penalty u/s 271(1)(c) would not be leviable as the assessee had given detailed explanation for charging lower rates and the same have not been controverted by the AO by bringing on record any evidence to show that the reasons / explanation given by the assessee was falls or unsubstantiated.
6
The reliance place by the AR on the Hon'ble Punjab & Haryana High Court judgment in the case of CIT Vs. Sangrur Vanaspati Mills Ltd. is perfectly in order. As such the penalty imposed by the AO deserves to be deleted. "

5. The Ld. DR relied upon the order of the Assessing Officer and submitted that assessee has not disclosed suo motto the surrendered amount of Rs. 45 lakhs in his return of income, therefore, it is a case of concealment of income and the revised return was filed after the Assessing Officer detected the concealed income upon which show cause notice was issued on 24.12.2008. Therefore, it is a fit case of concealment of income and penalt y should have been levied. The Ld. DR submitted that since revised return was filed after detection made by the Assessing Officer, therefore, the disclosure of Rs. 45 lakhs is not voluntaril y and bonafidl y and in support of his contention, the has relied upon the following decisions:-

i) Decision of Hon'ble Punjab & Haryana High Court in the case of Prempal Gandhi Vs CIT 335 ITR 23 [2011] 335 ITR 23 (P&H)
ii) Decision of Hon'ble Punjab & Haryana High Court in the case of CIT Vs M/s Bansal Abhushan Bhandar, Karnal (ITR Nos. 272 to 276 of 1995 - date of decision 6.11.2006)
iii) Decision of Hon'ble Punjab & Haryana High Court in the case of Rajesh Chawla Vs CIT (203 CTR 209)
iv) Unreported decision of Hon'ble Punjab & Haryana High Court in the case of Shevta Nanda v CIT & Others (Income Tax Appeal No. 810 of 2008 - date of decision 18.4.2011).

As regards the penalt y imposed on difference in the valuation of sale of properl y, the Ld. DR merel y relied upon the order of Assessing Officer. 7

6. On the other hand, the Ld. Counsel for the assessee reiterated the submissions made before the Ld. C IT(A) and submitted that surrender letter was filed during the search itself on 10.08.2006 which is already part of the record. The assessee has paid advance tax of Rs. 5 lakhs each on due dates and the same has also been the part of the record and thus assessee paid Rs. 15 lakhs as advance tax on the surrendered income which is also shown in the original return of income filed on 3 r d September 2007 u/s 139(1) of the Income Tax Act (PB-2). PB-04 is revised return in which assessee has specificall y mentioned the surrender of Rs. 45 lakhs upon which advance tax has also been paid. The cash flow chart and balance sheets were field before the Assessing Officer and at the assessment stage on 16.12.2008 i.e before the order sheet dated 24.12.2008 pointed out by the Ld. DR in which also the assessee has specificall y declared the surrendered income of Rs. 45 lakhs. The copy of the same is filed at pages 6 & 7 of the paper book reflecting surrendered amount of Rs. 45 lakhs. The assessee never retracted from the surrender of Rs. 45 lakhs at any stage. There was no query raised by Assessing Officer regarding non inclusion of Rs. 45 lakhs till 16.12.2008 though the proceedings started earlier. From the details filed on balance sheet and cash flow statement on 16.12.2008 (PB-6 & 7), the Assessing Officer become aware of the non inclusion of the amount of Rs. 45 lakhs in computation of income and on that basis onl y he raised the query on 24.12.2008 as to how this amount has been accounted for in the return. Thus Assessing Officer was aware of the surrender of the amount and from the advance tax already paid by the assessee were neither the assessee nor the Assessing Officer could notice the inadvertent error, therefore, everything was part of the record, therefore, there was no concealment on the part of the assessee at any point of time. It was an inadvertent error that while preparing computation of income, income of Rs. 45 lakhs was omitted to be disclosed in the original return but there was no intention to conceal anything because every fact was disclosed and was the part of the record to show the assessee 8 voluntaril y surrendered Rs. 45 lakhs. He has relied upon the decision of the Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd v CIT (2012) 348 ITR 306 (SC) in which though everything had been mentioned in the tax audit report but was not disallowed, while preparing the computation of income, it was held that it was a case of inadvertent mistake and no penalt y was leviable for concealment. He has also relied upon the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Ravail Singh and Co. [2002] 254 ITR 191 (P&H.) held 'that Penalty - Concealment of income- Additions made on basis of estimate and not on concrete evidence of concealment of income - Penalty not leviable under section 271(1)(c) - Income-Tax Act, 1961, s. 271(1)(c), Expln'.

7. He has also relied upon the decision of Hon'ble Supreme Court in the case of C IT Vs. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC) held that 'No information given in return found to be incorrect - Making incorrect claim

- Does not amount to concealment of "particulars"- Income-Tax Act, 1961, s. 271(1) (c)'.

8. The Ld. Counsel for the assessee, therefore, submitted that all facts and surrender of the amount were already within the knowledge of the Revenue Department and part of the record and it was also specifically disclosed in the cash flow and balance sheet filed at assessment stage on 16.12.2008, therefore, it is a case of bonafide error and not a case of concealment of income. He has submitted that assessee has surrendered amount during the course of search u/s 132(4) read with clause (2) of Explanation 5 to section 271(1) (c) of the Act which has been accepted, therefore, penalt y is not leviable. Ld. Counsel for the assessee also submitted that none of the judgment cited by the Ld. DR are applicable because in all these cases there was a enquiry by the Department and all the facts were confronted to the assessee and thereafter the assessee made 9 the surrender. Thus, the facts are entirely different. As regards the penalt y on sale of propert y, he has submitted that merel y because the sale rate was enhanced by the Assessing Officer as against the sale deed is no ground to prove that assessee has concealed the particulars of income or filed inaccurate particulars of income.

9. We have heard the rival submissions and considered the material available on record. It is not disputed that assessee has made surrender of Rs. 45 lakhs during the course of search on 10.8.2006 itself and surrender was within the knowledge of the Revenue Department. The assessee never retracted from the surrender so made during the course of search. The assessee also made such surrender while his statement was recorded during search u/s 132(4) of the Income Tax Act. The assessee in pursuance of his surrender also deposited the advance tax of Rs. 15 lakhs in three installments of Rs. 5 lakhs each on 14.9.2006, 12.12.2006 and 15.3.2007. Thus, all facts were disclosed to the Revenue Department in pursuance to the surrender of Rs. 45 lakhs that assessee made during the course of search. The assessment year under appeal is 2007-08 and the due date of filing of return u/s 139(1) did not expire on the date of the surrender made by the assessee. The Ld. DR filed the copy of the order sheet to show that Assessing Officer asked for explanation of the assessee on 24.12.2008 as to how the amount of Rs. 45 lakhs have been accounted for in the return of income. The Ld. Counsel for the assessee, however, submitted that in the original return of income field on 3.9.2007, the assessee individual could not show the surrender of Rs. 45 lakhs but advance tax of Rs. 15 lakhs paid on surrendered amount of Rs. 45 lakhs has been disclosed in the computation of income filed with the original return of income. The Ld. Counsel for the assessee also pointed out as per the order sheet dated 24.12.2008, pointed out by Ld. DR the assessee has filed cash flow chart and balance sheet on 16.12.2008 before Assessing Officer wherein the surrendered income had been 10 reflected and the copy of the same is filed at pages 6 & 7 of the paper book. It would, therefore, show that prior to the order sheet dated 24.12.2008, the Assessing Officer did not raised any query on this issue and prior to that the assessee had already declared and disclosed that Rs. 45 lakhs had already been disclosed to the Revenue Department is also accounted for in the cash flow statement (capital account) and the balance sheet. The assessee, therefore, disclosed all the particulars of the surrender of amount as well at the stage of the assessment. The assessee on realizing the mistake has immediatel y filed the revised return on 26.12.2008 including the surrender amount of Rs. 45 lakhs in the return of income. Such was an inadvertent mistake on the part of the assessee because the fact of the surrender of Rs. 45 lakhs was already disclosed before the Assessing Officer prior to the assessment as well as the assessment stage before the Assessing Officer detects any mistake. Revised return filed by the assessee u/s 139(5) was also valid return of income field in accordance with law. Thus, it is not a case of detection of anything by the Assessing Officer prior to filing of the revised return by the assessee. The Assessing Officer was having all facts and information on record of surrender of Rs. 45 lakhs and payment of tax on the same before filing the original return of income. 9.1 The Hon'ble Madras High Court in the case of CIT v. S.I. Paripushpam [2001] 249 ITR 550 (Mad.) held that 'there was no evidence on the basis of which the Department could contend that the assessee had fraudulently or willfully or negligently concealed the income. The assessee's agreeing to the addition of the amount by itself did not establish fraud or willful neglect without something more. Hence the Tribunal was justified in cancelling the penalty levied under section 271(1)(c) of the Income-tax, 1961.' 9.2 The Hon'ble Gujarat High Court in the case of C IT v. Union Electric Corporation [2006]281 ITR 266 (Guj.) held that 'penalty was imposed on the assessee in the assessment year 1981-82. The Tribunal after hearing the parties 11 came to the conclusion that the debt entry was a solitary instance in which the cost of wires was shown as "consumable stores" and the assessee failed to recover the same from the sister concern. The assessee had come forward with a request to disallow the same on account of apparent mistake and the request was made by the assessee during the course of assessment proceedings before the Assessing Officer had detected this fact. The tribunal, therefore, held that the bona fides of the assessee were evident and in such case imposition of penalty was not warranted. On a reference:

Held, that the Tribunal had recorded findings of fact as to the admission made by the assessee and the bona fides of the assessee. The facts as such were not disputed. Hence penalty could not be levied.' 9.3 The Hon'ble Punjab & Haryana In the Punjab and Haryana High Court in the case of C IT v. Budhewal Co-operative Sugar Mills Ltd. [2009] 312 ITR 92 (P&H) held 'dismissing the appeal, that the society had paid advance tax as well as self-assessment tax not taking into account the deduction claimed under section 80P(2)(a)(iii) of the Act. It was evident from the facts that the assessee's claim was bona fide and that all the particulars relating to the computation of income had been disclosed. Thus, the Tribunal rightly cancelled the penalty levied."

9.4 The Hon'ble Punjab & Haryana High Court in the case of C IT v. Bhandari Silk Store. [2011] 337 ITR 153 (P&H) held that 'the tribunal while upholding the deletion of penalty on surrender of Rs. 2 lakhs had categorically recorded that the surrender related to the stocks included under the definition of other valuable articles of things and that the condition enumerated under Explanation 5 to section 271(1)(C) were fulfilled. It was also not disputed that the statement of the assessee was recorded under section 132(4) of the Act on the date of search. Therefore, the Tribunal was right in upholding the order of the 12 Commissioner (Appeals) cancelling the penalty on Rs. 2 Lakhs. It had been noticed by the Tribunal that the assessee had disclosed the amount of Rs. 1,25,000/- at the time the search party was learning the premises of the assessee. It was further recorded that the time for filing the return of income for the assessment year 1989-90 under section 139(1) had not expired on the date of search and the assessee having disclosed the amount of Rs. 1,25,000/- in the return filed for the assessment year 1989-90 and paid all taxes could not be held to have concealed the particulars of income which were liable to penalty under section 271(1)(c). The Tribunal was, thus, right in upholding the cancellation of penalty on this amount as well.'

10. Considering the above discussion and the case laws, it is clear that all the facts of surrendered income and actual surrender of Rs. 45 lakhs and payment of tax thereon were within the knowledge of the Revenue Department and were in fact disclosed by the assessee to the Revenue Department prior to the order sheet dated 24.12.2008. It appears to be inadvertent mistake on the part of the assessee in not mentioning Rs. 45 lakhs in the original return of income, therefore, the decision in the case of Price Waterhouse Coopers Pvt Ltd v C IT (supra) delivered by Hon'ble Supreme Court squarel y applied in favour of the assessee. The assessee thus would be entitled for benefit of Explanation 5(2) to section 271(1) (c) of the Income Tax Act. The decisions cited by Ld. DR are, therefore, clearl y distinguishable on facts because the Assessing Officer did not detect anything on or before 24.12.2008 because every fact was disclosed to the Revenue Department and within the knowledge of Assessing Officer. In view of the above discussion, we do not find any infirmit y in the order of Ld. C IT(A) and delete the penalty with regard to the surrender of Rs. 45 lakhs. 10.1 As regards the levy of penalt y on account of sale of propert y to Rahon Road, Ludhiana, the main reason for levy of penalt y was that assessee disclosed 13 lower rates of plots but the same was not supported by any reasons by the Assessing Officer for taking higher valuation. The Ld. DR admitted that no material or evidence was found during the course of search to support findings of the Assessing Officer that assessee has concealed any higher sale consideration. The assessee in support of the sale consideration filed sale deeds which have not been rebutted through any evidence. The assessee did not maintain regular books of account, therefore, provisions of section 145(3) were applied and rates were enhanced by the Assessing Officer for making estimated addition of Rs. 1,38,750/-. It is well settled law that for estimated addition, no penalt y is leviable. The particulars of sale of plots were also disclosed in the return of income filed by the assessee. The Hon'ble Madras High Court in the case of C IT v. K.R. Chinni Krishna Chetty[2000] 246 ITR 121(Mad.) held that 'Mere revision of income to a higher figure by assessing authority does not automatically warrant inference of concealment of income'.

11. Considering the above discussion, we are of the view that Ld. CIT(A) had properl y appreciated the facts and material on record and correctl y canceled the penalt y on this issue also.

12. In view of the above decision, we do not find any infirmit y in the order of Ld. C IT(A) in cancelling the penalt y.

13. In the result, Departmental appeal is dismissed.



        Order Pronounced in the Open Court on 13.09.2013



               Sd/-                                                Sd/-
      (T.R. SOOD)                                         (BHAVNESH SAINI)
  ACCOUNTANT MEMBER                                       JUDICIAL MEMBER
Dated : 13 t h September, 2013
Rkk
                                                                    14




Copy to:

  1.       The   Appellant
  2.       The   Respondent
  3.       The   CIT
  4.       The   CIT(A)
  5.       The   DR




                              B Y O R D ER ,


                              (A S S IS TA N T R E G IS TR A R )
                              ITAT, C H A N D IG A R H