Source: http://itronline.blogspot.com/2011/01/
Timestamp: 2018-07-20 08:23:46
Document Index: 454523400

Matched Legal Cases: ['art-6', 'art 4', 'art 6', 'art 5', 'art 5', 'art. 5', 'Art. 5', 'art 5', 'art 5', 'art 1']

ITR: 1/1/11 - 2/1/11
Fwd: SOME USEFUL JUDGEMENTS
From: pavan singla <singlapavan@gmail.com>
Date: Sun, Jan 30, 2011 at 00:03
Subject: SOME USEFUL JUDGEMENTS
S. 80IB : Deductions – Profits and Gains from Industrial Undertakings
–Manufacturing – Types of Sheets and Pre-engineering Building Material
Assessee had employed high–tech sophisticated machinery, e.g., for
marking roof tops, it bought plain sheets and gave them curved and
desired shape on cold rolled mill and thereafter, different
engineering operations were carried on and thus, ultimately assessee
gave technical inputs in respect of tensile strength, long durable
service life and structural quality keeping factors like heat
resistance operational requirement, energy consumption and
environmental factors in mind. Similarly, for beams columns and
rafters, assessee had used high duty shearing machine as against
simple fabrication tools employed by others. It had auto–welding
machines which gave uniform welding and made all parts uniformly
joining and becoming one static body and ultimately improved its
tensile strength. In view of above process, there was sea change from
raw materials to finished products, hence, the assessee could be said
to be engaged in production or manufacture of an article or thing and
entitled to deduction under section 80IB.
Once the scheme of amalgamation had been sanctioned with effect from a
particular date, it is binding on every one including the statutory
authorities and the only course open to the Revenue would be to act as
per the scheme sanctioned. The tax authorities are bound to take note
of state of affairs of the applicant as on the effective date i.e. 1st
Jan., 2004 and a revised return filed reflecting the same cannot be
ignored on the strength of section 139(5).
Confession made during survey cannot be the sole basis for making an
addition, without considering the explanation of assessee.
Babulal Gangwal, Jaipur vs. Addl. CIT (2010) Tax World December, 10
Vol. XLIV, Part-6, P. No. 222
Where the Assessing Officer has not pointed out any specific defect or
discrepancy in the account books maintained by the assessee which are
duly audited by an independent Chartered Accountant, there was no
justification in rejecting the books of accounts and making the
addition to the declared income.
Opinion of DVO per se is not an information for the purpose of
reopening assessment under section 147. Assessing Officer has to apply
his mind to the information if any, collected and must form a belief
ACIT vs. Dhariya Construction Company (2010) 328 ITR 515 / 236 CTR 226
/ 47 DTR 288 (SC)
S. 194A : Deduction of Tax at Source – Bank – Interest – Notional
Provision for half yearly interest of Cumulative deposit – (S. 201)
Bank making for notional provision for half yearly interest on account
of cumulative deposit shown in general ledger reversed on next working
day. Interest credited to provisioning account for macro–monitoring.
Interest not due and payable on that day. Deduction of tax not
S. 194C : Deduction of Tax at Source – Payment to Contractor and
Assessee–society having been created by transporters with a view to
enter into contracts with companies for transportation of goods and to
ensure allocation of work among all members on an equitable basis,
there is no sub-contract between the society and the members and
therefore, section 194C(2) is not attracted to the facts of the case
and the assessee society is not liable to deduct tax at source from
the payments made to the truck owners who are its members.
The assessee filed appeals before the Commissioner of Income-tax
(Appeals) against the assessment orders for Asst. Years 2004-05 to
2008-09. Though the appeals were ripe for hearing and the appellate
authority had already posted for hearing on different dates, the
Assessing Officer without considering the pendency of the appeals
issued demand notice and took steps for attachment of the assessee's
bank account. The assessee filed a Writ petition to challenge the
recovery action which was opposed by the department on the ground that
the assessee had repeatedly sought adjournment of the hearing of
appeals, the Court allowed the petition and directed to dispose the
appeals at the earliest possible after affording an opportunity of
hearing to the assessee, at any date within a period of one month from
the date of receipt of a copy of the Court's judgment and till such
time orders are passed by the appellate authority, recovery steps
shall be kept in abeyance. If there is no co-operation by assessee the
appellate authority is at liberty to finalise the appeals without
according any further opportunity of hearing.
The assessee filed a stay application before the Tribunal. The
department opposed the stay by relying on the Supreme Court in ACCE
vs. Dunlop India (1985) 154 ITR 172 (SC), and contended that as
paucity of funds had not been sufficiently demonstrated, for this
reason alone stay should not be granted. The Tribunal rejected the
contention of Departmental representative following B. N. Co. vs. Jt.
CIT (2001) 71 TTJ 153 (Kol.) and further held that Supreme Court's
observation in Dunlop cannot be interpreted to mean that the Tribunal
is denuded of the powers to grant stay until case for financial
stringency is successfully made out by the applicant. Accordingly stay
was granted till the disposal of appeal.
S. 2(24) : Income – Non-occupancy Charges – Transfer Fee – Voluntary
The receipt of non-occupancy charges, transfer fee and voluntary
contribution from its members by the Co-operative Housing Society is
ITO vs. Grand Pradi CHS Ltd. (2011) BCAJ Jan., 2011. P. 20 (Vol. 42B.
Part 4. 436
Assessees were entitled to recognize the interest income attributable
to 8 % RBI Bonds on cash basis to be reckoned at the time of
redemption of the bonds. Assessing Officer was not justified in making
addition on yearly accrual basis.
K. Nagendrasa & Ors. vs. Dy. CIT (2010) 48 DTR 492 (Bang.)(Trib
S. 10B : Exemption – Export Turnover – Foreign Expenditure for self
purpose – Turnover retained abroad
The assessee was engaged in the business of development of software by
way of on site and off shore development and had a branch in USA for
which separate accounts were maintained. The assessee claimed
deduction under section 10B in respect of the exports of software
made. In computing the export turnover, the Assessing Officer held
that the amount of Rs. 3.33 crores incurred by the USA branch
constituted "expenses incurred in foreign exchange in providing
technical services outside India" and had to be deducted from the
export turnover as provided under section 10B. He also held that the
turnover of the USA branch to the extent of Rs. 15.14 crores had to be
reduced from the export profits as it had not been received in
convertible foreign exchange in India within the period specified in
section 10B(3). On appeal CIT(A) upheld the claim of assessee with
regard to Rs. 15.14 crores while rejected the claim with regard to Rs
3.33 crores. The cross appeals of the parties were referred to Special
Bench. The Special Bench referring the circular No. 621 dated
19-12-1991 and 694 dated 23-11-1994 held that expenditure incurred on
site abroad is eligible for deduction under section 10B. As regards
the turnover of Rs. 15.14 retained abroad, one limb of the Government
cannot be allowed to defeat the operation of other limb. While section
10B requires the foreign exchange to be brought to India within the
prescribed period, the RBI permits the assessee to retain the said
foreign exchange abroad for specific purpose. RBI is the competent
authority for section 10B as well. The result is that reinvestment of
export earning is deemed to have been received in India and thereafter
to have been repatriated abroad. (Principle in J. B. Boda & Co. (1998)
233 ITR 271 (SC) followed).
Assessee is entitled to claim depreciation on plant and machinery even
if it is used during the year for trial production.
S. 32(1)(iv) : Depreciation – Initial Depreciation – Construction of
Considering the dictionary meaning of the term "building" along with
the purpose for which the provision of section 32(1)(iv) was enacted,
namely, to afford incentives to business to construct building for
housing lowly paid employees, the Tribunal was right in holding that
the assessee was entitled to initial depreciation under section
32(1)(iv) in respect of new residential quarters.
S. 32(2) : Depreciation – Unabsorbed – Carry forward and set off –
Export Oriented Unit – [S. 10B(6)]
In view of prohibition in section 10B(6) unabsorbed depreciation
carried over for several years is not allowed to be set off in the
assessment year immediately following end of the period of tax
exemption does not mean that the assessee cannot carry forward
unabsorbed depreciation or business loss until such assessment year;
S. 10B(6) has no application in Asst. Year 2003-04 for the assessee
which is enjoying exemption under section 10B from asst year 1996-97
to asst year 2006-07 and the assessee is entitled to carry forward
unabsorbed depreciation from Asst. Year 2002-03.
. 37(1) : Business Expenditure – Retrenchment Compensation –
Suspension of Manufacturing Activity
Assessee having suspended only its manufacturing activity and not
closed down its trading activity, it is not a case of closure of
business and therefore, expenses incurred by it towards severance cost
of employees is allowable as revenue expenditure.
Assessee a manufacturer of a soft drink having conducted a market
research by using the services of a professional agency to determine
its brand performance with price, gauge the consumer demand at the
current price or a lower price and to know whether its brand can adopt
a different pricing between the base flavours and the new flavours,
the expenses were incurred for exploring the circumstances as to how
assessee can carry on its business more potentially and not exploring
the market of a new product and therefore, same is allowable as
S. 37(1) : Business Expenditure – Capital or Revenue – Purchase of
Anti–virus software
Expenditure incurred on purchase of anti–virus software is of revenue
Chambal Fertilisers & Chemicals Ltd. vs. ACIT (2010) Tax World.
December Vol. XLIV. Part 6. P. 195
S. 37(1) : Business Expenditure – Payment to Trust for Opening and
Running a school in the assessee company premises
Payment made to a trust for opening a school in the assessee company's
premises will be allowable as deduction since the amount was paid with
the object of providing education to the children of employees of
assessee company within the company premises itself and was
necessitated for business purpose.
Administrative charges paid for obtaining loan are allowable as
revenue expenditure in the year of payment, notwithstanding the fact
that the assessee has treated this expenditure as deferred revenue
expenditure in its books of account and benefit of loan would accrue
S. 40(a)(ia) : Disallowance – Amendment by Finance Act, 2010
-Retrospective effect from the Asst. Year 2005-06 – TDS paid before
due date of filing of return
Section 40(a)(ia) by Finance Act, 2010 is retrospective and applies
from the day said section was brought in to the statute book i.e.
w.e.f. 1-4-2005, meaning thereby, that even if the TDS was paid by due
date for filing return of income, no disallowance under section
40(a)(ia) could be made for any of the assessment years starting from
Kanubhai Ramjibhai vs. ITO (2010) Chartered Accountants Association
Ahmedabad, December, 2010 P. 411
S. 40A(3) : Business Disallowance – Cash Payments – Distributor for
BSNL in its card division
During the year under consideration assessee made total purchases of
India Telephone cards at Rs. 270.64 lakhs, of which Rs. 187.73 lakhs
were by way of cash purchases. Assessing Officer invoked provisions of
section 40A(3) and disallowed 20% of impugned expenditure. CIT(A)
upheld the disallowance. The Tribunal held that on facts, it was
apparent that relationship between service provider i.e. BSNL and
assessee–distributor was of principal and agent and income arising to
assessee was in nature of commission or remuneration against services
rendered, hence, disallowance under section 40A(3) is not applicable.
S. 54 : Capital Gains – Long Term Capital Gains – Allotment of Flat
under DDA – [S. 2(14), 2(29A), 2(42A)]
Assessee was allotted a flat under scheme of DDA on 27-2-1982.
Delivery of possession of said flat took place on 15-5-1986, when
actual flat number was allotted to assessee. Assessee sold said flat
on 1-1-1989 and claimed set off under section 54 against long term
Capital Gain. Assessing Officer treated the said transaction as short
term capital gain considering the date as 15-5-1986. The High Court
held that under self finance scheme, an allottee gets title to
property on issuance of an allotment letter and payment of
installments is only a consequential action upon which delivery of
possession flows hence claim under section 54 was justified.
S. 54 : Capital Gains – Exemption – Investment in more than one
residential house – (General Clauses Act 1897 – S. 13)
Expression "a residential house" in section 54 should be understood in
a sense that the building should be residential in nature and "a"
should not be understood to indicate a singular number, assessee was
entitled to claim exemption under section 54 in respect of four
residential flats acquired by her.
. 80-IA(9) : Deduction – Industrial Undertaking – Interpretation – (S. 80HHC)
S. 80-IA(9) cannot be interpreted to mean that section 80-IA deduction
has to be reduced for computing section 80HHC deduction. The
restriction in section 80IA(9) relates to the allowance of deduction
i.e. seeks to curtail allowance and not computation of deduction.
Section 80IA(9) does not disturb the mechanism of computing the
deduction provided under section 80HHC(3). The reasonable construction
of section 80IA(9) is that where deduction is allowed under section
80IA, then the deduction computed under other provisions under heading
'C' of Chapter VIA has to be restricted to the profits of the business
that remains after excluding the profits allowed as deductions under
section 80IA, so that the total deduction allowed under the heading
'C' of Chapter VIA does not exceed the profits of the business.
Associated Capsules Pvt. Ltd. vs. Dy. CIT (Bombay High Court) Source:
Posted by Rajkumar at 1:25:00 PM 0 comments
ITR(Trib) Vol 7 Part 5 dated 31-01-2011
Volume 7 : Part 5 (Issue dated : 31-1-2011)
Appeal to Appellate Tribunal --Jurisdiction--Restricted to subject-matter of appeal --Not confined to grounds raised in appeal--Decision on any other ground may be given after affording an opportunity to affected party--Income-tax Act, 1961, s. 254--Income-tax (Appellate Tribunal) Rules, 1963, r. 11--J oint CIT v. Reuters Ltd. (Mumbai) . . . 422
----Powers--Ground not set forth in appeal--Ground regarding existence of permanent establishment--No definite finding--Non-resident and Indian company whether associated enterprises--Deputation of employee of non-resident to Indian company to render services whether indication of Indian company service permanent establishment of non-resident--Plea within parameters of grounds of appeal to Tribunal--Matter remanded--Double Taxation Avoidance Agreement between India and the U. K. art. 5(2)(k), (5)-- Joint CIT v. Reuters Ltd. (Mumbai) . . . 422
Assessment --Estimation of income--Gross profit rate--Rejection of books of account--Additions on basis of books of account arbitrary--Assessing Officer estimating income on basis of gross profit rate--Justified--Income-tax Act, 1961-- Asst. CIT v. Lakshmi Industries (Chennai) . . . 495
Capital gains --Computation of capital gains--Assessees acquiring property by inheritance--Indexation to be with reference to year in which previous owner acquired asset--Property acquired by previous owner prior to 1-4-1981--Cost inflation index relating to financial year 1981-82 to be adopted--Income-tax Act, 1961, s. 2(42A), Expln. 1(b)-- M. Siva Parvathi v. ITO (Visakhapatnam) . . . 468
----Computation of capital gains--Deductions--Sale of house property acquired by inheritance--Payment made to persons claiming to be legal heirs--Expenditure incurred in removing encumbrance to transfer--Payments to tenants--Deductible--Income-tax Act, 1961-- M. Siva Parvathi v. ITO (Visakhapatnam) . . . 468
----Computation of capital gains--Property acquired by inheritance--Agreement to sell entered into prior to introduction of section 50C--Delay in registering sale deed due to genuine reasons--Completion of transaction after introduction of section 50C--Section 50C not applicable--Income-tax Act, 1961, s. 50C-- M. Siva Parvathi v. ITO (Visakhapatnam) . . . 468
----Exemption--Investment of net consideration in construction of "a residential house" and purchase of flat--Exemption restricted to investment in construction of residential house--Income-tax Act, 1961, s. 54-- M. Siva Parvathi v. ITO (Visakhapatnam) . . . 468
Deduction of tax at source --Works contract--Film finance--Assessee advancing money for production of film--Amount recoverable from producer of film--Assessee given certain rights--Agreement did not result in works contract--Assessee not liable to deduct tax at source on advances--Income-tax Act, 1961, s. 194C-- Muktha Arts v. Asst. CIT (Mumbai) . . . 517
Export --New industrial undertaking engaged in export--Deduction of 100 per cent. profits under section 10B--Assessee manufacturing and exporting garments--Forward contracts to protect sales from exchange fluctuations--Transaction speculative in character--Profits from forward contracts derived from speculation business--Not entitled to deduction under section 10B--Income-tax Act, 1961, ss. 10B, 28, Expln. 2-- Asst. CIT v. K. Mohan and Co. (Exports) P. Ltd. (Bangalore) . . . 507
Penalty --Concealment of income--Assessee agreeing to addition of unexplained credit on realising creditor will not co-operate--All details regarding identity of creditor and genuineness of transaction furnished by assessee--Failure to produce creditor to prove transaction to satisfaction of Assessing Officer--Imposition of penalty not justified--Income-tax Act, 1961, s. 271(1)(c)-- New Raja Jewellery v. ITO (Chennai) . . . 459
----Concealment of income--Disallowance of deductions on software expenditure and meal expenses accepted by assessee--Penalty cannot be imposed merely because assessee allowed matter to attain finality--Income-tax Act, 1961, s. 271(1)(c)-- Deputy CIT v. Boston Consulting Group (India) P. Ltd. (Mumbai) . . . 417
Revision --Commissioner--Show-cause notice by Income-tax Officer on proposal by Joint Commissioner--Assessment order not examined prior to initiation of revision proceedings--No application of mind by Commissioner--Revision order void ab initio--Income-tax Act, 1961, s. 263-- Jheendu Ram v. CIT (Lucknow) . . . 463
Search and seizure --Block assessment--Scope of section 158BC--Assessing Officer acquires jurisdiction to initiate block assessment only on issue of notice--Notice not mere procedural requirement--Notice to be issued by registered post acknowledgment due--Return to be filed thereafter--Income-tax Act, 1961, s. 158BC-- Asst. CIT v. Lakshmi Industries (Chennai) . . . 495
----Block assessment--Validity--Notice--Service of notice--No material to prove notice served on assessee--Failure on part of Department to issue notice despite information regarding non-receipt of notice by assessee--Expiry of time to issue notice when assessee filed return--Proceedings null and void ab initio--Income-tax Act, 1961, s. 158BC-- Asst. CIT v. Lakshmi Industries (Chennai) . . . 495
----Undisclosed income--Investments in power looms, rental income from hiring of looms and unexplained loans--Investments made prior to 1999--Addition cannot be made in 2002-03--Gross monthly rent of power loom determined based on seized material--Twenty per cent. deduction allowable on expenses incurred--Cash flow statement with regard to loans not properly considered by Assessing Officer--Matter remanded--Income-tax Act, 1961, s. 69-- Masoomkhan Shabbirkhan Pathan v. Deputy CIT (Mumbai) . . . 443
Words and phrases --"Thereon", "Pass such orders as Tribunal thinks fit"-- Joint CIT v. Reuters Ltd. (Mumbai) . . . 422
Double Taxation Avoidance Agreement between India and the U. K. :
Art. 5(2)(k), (5) --Appeal to Appellate Tribunal--Powers--Ground not set forth in appeal--Ground regarding existence of permanent establishment--No definite finding--Non-resident and Indian company whether associated enterprises--Deputation of employee of non-resident to Indian company to render services whether indication of Indian company service permanent establishment of non-resident--Plea within parameters of grounds of appeal to Tribunal--Matter remanded-- Joint CIT v. Reuters Ltd. (Mumbai) . . . 422
R. 11 --Appeal to Appellate Tribunal--Jurisdiction--Restricted to subject-matter of appeal--Not confined to grounds raised in appeal--Decision on any other ground may be given after affording an opportunity to affected party--J oint CIT v. Reuters Ltd. (Mumbai) . . . 422
S. 2(42A), Expln. 1(b) --Capital gains--Computation of capital gains--Assessees acquiring property by inheritance--Indexation to be with reference to year in which previous owner acquired asset--Property acquired by previous owner prior to 1-4-1981--Cost inflation index relating to financial year 1981-82 to be adopted-- M. Siva Parvathi v. ITO (Visakhapatnam) . . . 468
S. 10B --Export--New industrial undertaking engaged in export--Deduction of 100 per cent. profits under section 10B--Assessee manufacturing and exporting garments--Forward contracts to protect sales from exchange fluctuations--Transaction speculative in character--Profits from forward contracts derived from speculation business--Not entitled to deduction under section 10B-- Asst. CIT v. K. Mohan and Co. (Exports) P. Ltd. (Bangalore) . . . 507
S. 28, Expln. 2 --Export--New industrial undertaking engaged in export--Deduction of 100 per cent. profits under section 10B--Assessee manufacturing and exporting garments--Forward contracts to protect sales from exchange fluctuations--Transaction speculative in character--Profits from forward contracts derived from speculation business--Not entitled to deduction under section 10B-- Asst. CIT v. K. Mohan and Co. (Exports) P. Ltd. (Bangalore) . . . 507
S. 50C --Capital gains--Computation of capital gains--Property acquired by inheritance--Agreement to sell entered into prior to introduction of section 50C--Delay in registering sale deed due to genuine reasons--Completion of transaction after introduction of section 50C--Section 50C not applicable-- M. Siva Parvathi v. ITO (Visakhapatnam) . . . 468
S. 54 --Capital gains--Exemption--Investment of net consideration in construction of "a residential house" and purchase of flat--Exemption restricted to investment in construction of residential house-- M. Siva Parvathi v. ITO (Visakhapatnam) . . . 468
S. 69 --Search and seizure--Undisclosed income--Investments in power looms, rental income from hiring of looms and un-explained loans--Investments made prior to 1999--Addition cannot be made in 2002-03--Gross monthly rent of power loom determined based on seized material--Twenty per cent. deduction allowable on expenses incurred--Cash flow statement with regard to loans not properly considered by Assessing Officer--Matter remanded-- Masoomkhan Shabbirkhan Pathan v. Deputy CIT (Mumbai) . . . 443
S. 158BC --Search and seizure--Block assessment--Scope of section 158BC--Assessing Officer acquires jurisdiction to initiate block assessment only on issue of notice--Notice not mere procedural requirement--Notice to be issued by registered post acknowledgment due--Return to be filed thereafter-- Asst. CIT v. Lakshmi Industries (Chennai) . . . 495
----Search and seizure--Block assessment--Validity--Notice--Service of notice--No material to prove notice served on assessee--Failure on part of Department to issue notice despite information regarding non-receipt of notice by assessee--Expiry of time to issue notice when assessee filed return--Proceedings null and void ab initio-- Asst. CIT v. Lakshmi Industries (Chennai) . . . 495
S. 194C --Deduction of tax at source--Works contract--Film finance--Assessee advancing money for production of film--Amount recoverable from producer of film--Assessee given certain rights--Agreement did not result in works contract--Assessee not liable to deduct tax at source on advances-- Muktha Arts v. Asst. CIT (Mumbai) . . . 517
S. 254 --Appeal to Appellate Tribunal--Jurisdiction--Restricted to subject-matter of appeal --Not confined to grounds raised in appeal--Decision on any other ground may be given after affording an opportunity to affected party--J oint CIT v. Reuters Ltd. (Mumbai) . . . 422
S. 263 --Revision--Commissioner--Show-cause notice by Income-tax Officer on proposal by Joint Commissioner--Assessment order not examined prior to initiation of revision proceedings--No application of mind by Commissioner--Revision order void ab initio-- Jheendu Ram v. CIT (Lucknow) . . . 463
S. 271(1)(c) --Penalty--Concealment of income--Assessee agreeing to addition of unexplained credit on realising creditor will not co-operate--All details regarding identity of creditor and genuineness of transaction furnished by assessee--Failure to produce creditor to prove transaction to satisfaction of Assessing Officer--Imposition of penalty not justified-- New Raja Jewellery v. ITO (Chennai) . . . 459
----Penalty--Concealment of income--Disallowance of deductions on software expenditure and meal expenses accepted by assessee--Penalty cannot be imposed merely because assessee allowed matter to attain finality--Deputy CIT v. Boston Consulting Group (India) P. Ltd. (Mumbai) . . . 417
Posted by Rajkumar at 10:20:00 PM 0 comments
ITR : Volume 330 : Part 5 Issue dated 31-01-2011
Volume 330 : Part 5 (Issue dated 31-1-2011)
Advance tax --Interest--Non-resident--Entire income liable to deduction of tax at source--Assessee not liable for advance tax--Cannot be charged interest for failure to pay advance tax--Income-tax Act, 1961, ss. 201, 209, 234B-- Director of Income-tax v. Jacabs Civil Incorporated (Delhi) . . . 578
Assessment --Assessment on agreed basis--Assessee cannot appeal against such order--Income-tax Act, 1961-- CIT v. Vamadevan Bhanu (Ker) . . . 559
Business expenditure --Disallowance--Excessive and unreasonable payments--Addition for purchases and sales made from sister concern--Finding by Commissioner (Appeals) as well as Tribunal as to genuineness of valuation in transaction between sister concerns not perverse--Findings of fact--Income-tax Act, 1961, s. 40A(2)(b)-- CIT v. Jyoti Industries (P&H) . . . 573
----Disallowance--Excessive or unreasonable payments--Trade discount--Discount allowed to sister concern--Assessee claiming 11 per cent. on ground of bulk sales--Assessing Officer allowing 3 per cent., Commissioner (Appeals) enhancing to 8 per cent. while Tribunal reducing to 5 per cent.--Assessee allowed 11 per cent. in earlier years--Assessee entitled to 11 per cent.--Trade discount not an expenditure--Section 40A(2)(b) does not apply--Income-tax Act, 1961, s. 40A(2)(b)-- United Exports v. CIT (Delhi) . . . 549
Capital gains --Valuation of capital asset--Reference to Departmental Valuation Officer--Condition precedent--Opinion of Assessing Officer that value claimed is less than fair market value--Income-tax Act, 1961, s. 55A-- CIT v. Umedbhai International P. Ltd. (Cal) . . . 506
Cash credits --Burden of proof--Initial burden on assessee to prove identity of creditors--Burden then shifts to Revenue to prove credits were not genuine--Identity of applicants for shares and their PAN numbers furnished--Amounts received through account payee cheques--Inability to find a few applicants--Not sufficient to invoke section 68--Income-tax Act, 1961, s. 68-- CIT v. Winstral Petrochemicals P. Ltd . (Delhi) . . . 603
Circulars --Scope of--Income-tax Act, 1961, s. 119-- Deputy CIT v. Sunita Finlease Ltd. (Chhattisgarh) . . . 491
Deductions --Law applicable--Section 14A prohibiting deduction of expenses relating to non-taxable income--Circular of CBDT dated 23-7-2001 stating that concluded assessments could not be reopened for purposes of section 14A--Meaning of "concluded assessment"--Assessment which could be modified by higher authority not a concluded assessment till expiry of time-limit for such modification--Assessment order remanded for modification in appeal--Subsequent revision of order--Permissible--Income-tax Act, 1961, s. 14A--CBDT Circular 11 dated 23-7-2001 (250 ITR (St.) 84)-- Catholic Syrian Bank Ltd . v. CIT (Ker) . . . 556
Deduction of tax at source --Salary--Effect of sub-section (3) of section 192--Default in deduction can be made up during financial year--Income-tax Act, 1961, ss. 192, 201-- CIT v. Enron Expat Services Inc. (Uttarakhand) . . . 496
Estimate of income --Gross profit--Assessee failing to produce books of account--Assessing Officer assessing income at 5 per cent. of gross receipts--Tribunal modifying to 4 per cent. of gross receipts--Justified--Assessment for previous year a guide not binding for subsequent years--Income-tax Act, 1961-- Arvind Baloni v. ITAT (P&H) . . . 589
Income-tax --General principles--Rule of consistency--Loss on sale of shares treated as business loss though stock of shares shown as investment--Assessment after enquiry--Different view not to be taken for subsequent year--Income-tax Act, 1961-- CIT v. Darius Pandole (Bom) . . . 485
Interest --Interest on excess refund--Provision not applicable prior to assessment year 2004-05--Income-tax Act, 1961, s. 234D-- Director of Income-tax v. Jacabs Civil Incorporated (Delhi) . . . 578
Interest on borrowed capital --Disallowance on ground that a part of amount given to subsidiary company--Revenue failing to establish that loan given for only personal purposes--Finding that interest not to be disallowed--Justified--Income-tax Act, 1961, ss. 36(1)(iii), 37-- CIT v. Dalmia Cement Bharat Ltd. (Delhi) . . . 595
Penalty --Assessee claiming revenue expenditure--Penalty imposed holding expenditure capital--Finding by Commissioner (Appeals) as well as Tribunal that issue debatable--Penalty not attracted--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Krishna Maruti Ltd. (Delhi) . . . 547
----Concealment of income--Assessee computing pre-operative expenses after deducting interest and showing in balance-sheet filed along with return of income--Assessing Officer holding that interest cannot be adjusted against pre-operative expenses--Not a case of concealment of income--Penalty cannot be imposed--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Mushashi Autoparts India P. Ltd. (Delhi) . . . 545
Reassessment --Unexplained money--Presumption that represents income of year in which found--Voluntary disclosure under 1997 Scheme of assets stated to be acquired in 1985-86 and 1986-87--Declaration becoming invalid for failure to pay tax--Reassessment for assessment year 1998-99 on basis of disclosure--Permissible--Income-tax Act, 1961, ss. 69A, 147, 148--Finance Act, 1997, ss 68, 71, 72-- CIT v. Prem Pal (P&H) . . . 499
Recovery of tax --Interest on delayed payment of tax--Waiver of interest--Conditions precedent--Conditions laid down in section 220(2A) are cumulative--Payment of interest whether would cause genuine hardship to assessee--Income of relevant period to be taken into account--Past liabilities not relevant--Finding that payment of interest would not cause genuine hardship--Refusal to waive interest--Justified--Income-tax Act, 1961, s. 220(2A)-- P. Sudhakaran v. Deputy CIT (Ker) . . . 488
----Interest--Waiver of interest--Law applicable--Section 220(2A) inserted with effect from 1-10-1984--Not applicable where assessments completed and demand notices issued before 1-10-1984--Writ petition challenging validity of provision--Failure to pay tax under disputed provision--Presumption of validity of provision--Provision subsequently held valid by Supreme Court--Levy of interest justified--Income-tax Act, 1961, s. 220(2A)-- Prakash Tubes Ltd. v. Union of India (Delhi) . . . 561
Rectification of mistakes --Loss--Set-off--Debatable issue not mistake apparent from record--Wrong allowance of set off of losses could not be rectified under section 154--Income-tax Act, 1961, ss. 143(3), 154, 158BC-- CIT v. Soora Subramanian (Mad) . . . 591
Revision --Limitation--Order of assessment subject of rectification--Notice for revision on issue not affected by rectification and referring to order of assessment--Limitation to be reckoned from date of assessment order, not date of rectification--Income-tax Act, 1961, ss. 143, 154, 263-- CIT v. Shriram Engineering Construction Co. Ltd . (Mad) . . . 568
Scrutiny of cases --Circular--Circular prescribing time limit of three months for scrutiny for returns filed in financial year 2004-05--Circular binding on Revenue authorities--CBDT Instruction No. 9 of 2004, dated September 20, 2004--Income-tax Act, 1961, s. 119-- Deputy CIT v. Sunita Finlease Ltd. (Chhattisgarh) . . . 491
Search and seizure --Block assessment--Undisclosed income--Definition--No valid return of income filed by assessee for any of the years of block period--Response to notice issued under section 131 not disclosure for the purpose of Act--Onus on assessee to disclose undisclosed income by way of return before commencement of search--Block assessment on materials seized on search valid--Matter remanded--Income-tax Act, 1961, ss. 132, 158BB, 158BC, 158BD-- CIT v. Sivabala Devi (Mad) . . . 510
----Block assessment--Warrant of authorisation issued in joint names of husband and wife--Individual assessment on wife alone--Not valid--Income-tax Act, 1961, s. 158BC-- CIT v. Smt. Vandana Verma (All) . . . 533
Ss. 68, 71, 72 --Reassessment--Unexplained money--Presumption that represents income of year in which found--Voluntary disclosure under 1997 Scheme of assets stated to be acquired in 1985-86 and 1986-87--Declaration becoming invalid for failure to pay tax--Reassessment for assessment year 1998-99 on basis of disclosure--Permissible-- CIT v. Prem Pal (P&H) . . . 499
S. 14A --Deductions--Law applicable--Section 14A prohibiting deduction of expenses relating to non-taxable income--Circular of CBDT dated 23-7-2001 stating that concluded assessments could not be reopened for purposes of section 14A--Meaning of "concluded assessment"--Assessment which could be modified by higher authority not a concluded assessment till expiry of time-limit for such modification--Assessment order remanded for modification in appeal--Subsequent revision of order--Permissible--CBDT Circular 11 dated 23-7-2001 (250 ITR (St.) 84)-- Catholic Syrian Bank Ltd . v. CIT (Ker) . . . 556
S. 36(1)(iii) --Interest on borrowed capital--Disallowance on ground that a part of amount given to subsidiary company--Revenue failing to establish that loan given for only personal purposes--Finding that interest not to be disallowed--Justified-- CIT v. Dalmia Cement Bharat Ltd. (Delhi) . . . 595
S. 37 --Interest on borrowed capital--Disallowance on ground that a part of amount given to subsidiary company--Revenue failing to establish that loan given for only personal purposes--Finding that interest not to be disallowed--Justified-- CIT v. Dalmia Cement Bharat Ltd. (Delhi) . . . 595
S. 40A(2)(b) --Business expenditure--Disallowance--Excessive and unreasonable payments--Addition for purchases and sales made from sister concern--Finding by Commissioner (Appeals) as well as Tribunal as to genuineness of valuation in transaction between sister concerns not perverse--Findings of fact-- CIT v. Jyoti Industries (P&H) . . . 573
----Business expenditure--Disallowance--Excessive or unreasonable payments--Trade discount--Discount allowed to sister concern--Assessee claiming 11 per cent. on ground of bulk sales--Assessing Officer allowing 3 per cent., Commissioner (Appeals) enhancing to 8 per cent. while Tribunal reducing to 5 per cent.--Assessee allowed 11 per cent. in earlier years--Assessee entitled to 11 per cent.--Trade discount not an expendi-ture--Section 40A(2)(b) does not apply-- United Exports v. CIT (Delhi) . . . 549
S. 55A --Capital gains--Valuation of capital asset--Reference to Departmental Valuation Officer--Condition precedent--Opinion of Assessing Officer that value claimed is less than fair market value-- CIT v. Umedbhai International P. Ltd. (Cal) . . . 506
S. 68 --Cash credits--Burden of proof--Initial burden on assessee to prove identity of creditors--Burden then shifts to Revenue to prove credits were not genuine--Identity of applicants for shares and their PAN numbers furnished--Amounts received through account payee cheques--Inability to find a few applicants--Not sufficient to invoke section 68-- CIT v. Winstral Petrochemicals P. Ltd . (Delhi) . . . 603
S. 69A --Reassessment--Unexplained money--Presumption that represents income of year in which found--Voluntary disclosure under 1997 Scheme of assets stated to be acquired in 1985-86 and 1986-87--Declaration becoming invalid for failure to pay tax--Reassessment for assessment year 1998-99 on basis of disclosure--Permissible-- CIT v. Prem Pal (P&H) . . . 499
S. 119 --Circulars--Scope of-- Deputy CIT v. Sunita Finlease Ltd. (Chhattisgarh) . . . 491
----Scrutiny of cases--Circular--Circular prescribing time limit of three months for scrutiny for returns filed in financial year 2004-05--Circular binding on Revenue authorities--CBDT Instruction No. 9 of 2004, dated September 20, 2004-- Deputy CIT v. Sunita Finlease Ltd. (Chhattisgarh) . . . 491
S. 132 --Search and seizure--Block assessment--Undisclosed income--Definition--No valid return of income filed by assessee for any of the years of block period--Response to notice issued under section 131 not disclosure for the purpose of Act--Onus on assessee to disclose undisclosed income by way of return before commencement of search--Block assessment on materials seized on search valid--Matter remanded-- CIT v. Sivabala Devi (Mad) . . . 510
S. 143 --Revision--Limitation--Order of assessment subject of rectification--Notice for revision on issue not affected by rectification and referring to order of assessment--Limitation to be reckoned from date of assessment order, not date of rectification-- CIT v. Shriram Engineering Construction Co. Ltd . (Mad) . . . 568
S. 143(3) --Rectification of mistakes--Loss--Set-off--Debatable issue not mistake apparent from record--Wrong allowance of set off of losses could not be rectified under section 154-- CIT v. Soora Subramanian (Mad) . . . 591
S. 147 --Reassessment--Unexplained money--Presumption that represents income of year in which found--Voluntary disclosure under 1997 Scheme of assets stated to be acquired in 1985-86 and 1986-87--Declaration becoming invalid for failure to pay tax--Reassessment for assessment year 1998-99 on basis of disclosure--Permissible-- CIT v. Prem Pal (P&H) . . . 499
S. 148 --Reassessment--Unexplained money--Presumption that represents income of year in which found--Voluntary disclosure under 1997 Scheme of assets stated to be acquired in 1985-86 and 1986-87--Declaration becoming invalid for failure to pay tax--Reassessment for assessment year 1998-99 on basis of disclosure--Permissible-- CIT v. Prem Pal (P&H) . . . 499
S. 154 --Rectification of mistakes--Loss--Set-off--Debatable issue not mistake apparent from record--Wrong allowance of set off of losses could not be rectified under section 154-- CIT v. Soora Subramanian (Mad) . . . 591
----Revision--Limitation--Order of assessment subject of rectification--Notice for revision on issue not affected by rectification and referring to order of assessment--Limitation to be reckoned from date of assessment order, not date of rectification-- CIT v. Shriram Engineering Construction Co. Ltd . (Mad) . . . 568
S. 158BB --Search and seizure--Block assessment--Undisclosed income--Definition--No valid return of income filed by assessee for any of the years of block period--Response to notice issued under section 131 not disclosure for the purpose of Act--Onus on assessee to disclose undisclosed income by way of return before commencement of search--Block assessment on materials seized on search valid--Matter remanded-- CIT v. Sivabala Devi (Mad) . . . 510
S. 158BC --Rectification of mistakes--Loss--Set-off--Debatable issue not mistake apparent from record--Wrong allowance of set off of losses could not be rectified under section 154-- CIT v. Soora Subramanian (Mad) . . . 591
----Search and seizure--Block assessment--Undisclosed income--Definition--No valid return of income filed by assessee for any of the years of block period--Response to notice issued under section 131 not disclosure for the purpose of Act--Onus on assessee to disclose undisclosed income by way of return before commencement of search--Block assessment on materials seized on search valid--Matter remanded-- CIT v. Sivabala Devi (Mad) . . . 510
----Search and seizure--Block assessment--Warrant of authorisation issued in joint names of husband and wife--Individual assessment on wife alone--Not valid-- CIT v. Smt. Vandana Verma (All) . . . 533
S. 158BD --Search and seizure--Block assessment--Undisclosed income--Definition--No valid return of income filed by assessee for any of the years of block period--Response to notice issued under section 131 not disclosure for the purpose of Act--Onus on assessee to disclose undisclosed income by way of return before commencement of search--Block assessment on materials seized on search valid--Matter remanded-- CIT v. Sivabala Devi (Mad) . . . 510
S. 192 --Deduction of tax at source--Salary--Effect of sub-section (3) of section 192--Default in deduction can be made up during financial year-- CIT v. Enron Expat Services Inc. (Uttarakhand) . . . 496
S. 201 --Advance tax--Interest--Non-resident--Entire income liable to deduction of tax at source--Assessee not liable for advance tax--Cannot be charged interest for failure to pay advance tax-- Director of Income-tax v. Jacabs Civil Incorporated (Delhi) . . . 578
----Deduction of tax at source--Salary--Effect of sub-section (3) of section 192--Default in deduction can be made up during financial year-- CIT v. Enron Expat Services Inc. (Uttarakhand) . . . 496
S. 209 --Advance tax--Interest--Non-resident--Entire income liable to deduction of tax at source--Assessee not liable for advance tax--Cannot be charged interest for failure to pay advance tax-- Director of Income-tax v. Jacabs Civil Incorporated (Delhi) . . . 578
S. 220(2A) --Recovery of tax--Interest on delayed payment of tax--Waiver of interest--Conditions precedent--Conditions laid down in section 220(2A) are cumulative--Payment of interest whether would cause genuine hardship to assessee--Income of relevant period to be taken into account--Past liabilities not relevant--Finding that payment of interest would not cause genuine hardship--Refusal to waive interest--Justified-- P. Sudhakaran v. Deputy CIT (Ker) . . . 488
----Recovery of tax--Interest--Waiver of interest--Law applicable--Section 220(2A) inserted with effect from 1-10-1984--Not applicable where assessments completed and demand notices issued before 1-10-1984--Writ petition challenging validity of provision--Failure to pay tax under disputed provision--Presumption of validity of provision--Provision subsequently held valid by Supreme Court--Levy of interest justified-- Prakash Tubes Ltd. v. Union of India (Delhi) . . . 561
S. 234B --Advance tax--Interest--Non-resident--Entire income liable to deduction of tax at source--Assessee not liable for advance tax--Cannot be charged interest for failure to pay advance tax-- Director of Income-tax v. Jacabs Civil Incorporated (Delhi) . . . 578
S. 234D --Interest--Interest on excess refund--Provision not applicable prior to assessment year 2004-05-- Director of Income-tax v. Jacabs Civil Incorporated (Delhi) . . . 578
S. 263 --Revision--Limitation--Order of assessment subject of rectification--Notice for revision on issue not affected by rectification and referring to order of assessment--Limitation to be reckoned from date of assessment order, not date of rectification-- CIT v. Shriram Engineering Construction Co. Ltd . (Mad) . . . 568
S. 271(1)(c) --Penalty--Assessee claiming revenue expenditure--Penalty imposed holding expenditure capital--Finding by Commissioner (Appeals) as well as Tribunal that issue debatable--Penalty not attracted-- CIT v. Krishna Maruti Ltd. (Delhi) . . . 547
----Penalty--Concealment of income--Assessee computing pre-operative expenses after deducting interest and showing in balance-sheet filed along with return of income--Assessing Officer holding that interest cannot be adjusted against pre-operative expenses--Not a case of concealment of income--Penalty cannot be imposed-- CIT v. Mushashi Autoparts India P. Ltd. (Delhi) . . . 545
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Revised Return - Concealment of Income u/s 271(1)(c)
Part 1: Revised Return - Concealment of Income u/s 271(1)(c)
Narendra Pratap Bhalla vs ACIT (ITAT)
Dated: 7th Jan 2011
S. 271(1)(c)- Revised Return - Whether AO was erred on facts and in law in applying the provisions of section 271(1)(c) of the Act in levying penalty where assessee have furnished all the documents relating to the gift, in the shape of gift deeds along with the affidavit of the donors, copy of their PAN cards, acknowledgement of returns filed by the donors and the copies of balance sheet proving the genuineness of the gift but since the assessee was not keeping good health and did not want any confrontation and unnecessary litigation with the department, so to attain peace of mind, the return of income was revised surrendering the amount of `10,00,000/- which was earlier shown as gifts. Held, No
1. Dy. CIT vs. Tarun Agarwal 2009 (13) MTC 831, the ITAT Lucknow Bench 'A' held that "the assessee had surrendered the amount before any specific detection of undisclosed income or even before the issue of notice. Even though a general enquiry was going on and notices had been issued to some of his relatives and the amount might have been surrendered because of compulsion of circumstances, it was not sufficient to penalise the assessee as the factum of detection was not there."
2. Qudai International vs. Income Tax Officer 2009 (13) MTC 622 (Trib), the ITAT Lucknow Bench 'A' held that "mere raising of query by the Assessing Officer did not amount to detection of concealment. It cannot therefore, be said that the revised return was filed after detection of concealment and was not voluntary. The term "detection" itself implies the Assessing Officer had reached a conclusion but the query raised by the Assessing Officer was only first step in detection of concealment. If the assessee voluntarily revised the return, it could not be said that it does not fulfill requirements of section 139(5) of the Act."
IN THE INCOME TAX APPELLATE TRIBUNAL, LUCKNOW BENCH "B", LUCKNOW
BEFORE SHRI H. L. KARWA, HON'BLE VICE PRESIDENT AND SHRI N. K. SAINI, ACCOUNTANT MEMBER
I.T.A. No.309/Luc/10 Assessment year: 2001-2002
Shri Narendra Pratap Bhalla, Vs. A.C.I.T.-3,
7/58, Tilak Nagar, Kanpur.
PAN:AESPB4708D
I.T.A. No.310/Luc/10 Assessment year: 2001-2002
Smt. Aparna Singh, Vs. A.C.I.T.-3,
Appellant by : Shri Rakesh Garg, Advocate Respondent by: Ms. Saifali Swaroop, D. R.
PER N. K. SAINI:
These two appeals, filed by the assessees, are directed against the separate orders of CIT(A)-II, Kanpur dated 15/02/2010 in the case of Smt. Aparna Singh and 18/02/2010 in the case of Shri Narendra Pratap Bhalla. Since the issue involved in both these appeals is similar having identical fact and the appeals were heard together so these are being disposed of by this consolidated order for the sake of convenience. First we will deal with the appeal in I.T.A. No.310/Luc/10 in the case of Smt. Aparna Singh. In this appeal the assessee has raised the following grounds:
"1. Because the CIT(A) has erred on facts and in law in confirming the levy of penalty of `3,51,000/- u/s. 271(1)(c) of the Act.
2. Because on a proper consideration of facts and circumstances of the case, the assessee having neither concealed his income, nor furnished inaccurate particulars thereof, the CIT(A) as well as the Assessing Officer both have erred on facts and in law in applying the provisions of section 271(1)( c) of the Act in levying penalty of `3,51 ,000/-.
3. Because the penalty order passed u/s 271(1)(c) is without jurisdiction bad in law, void ab initio and be quashed.
4. Because the CIT(A) has not considered the explanation as well as the facts of the case, and has erroneously held that the assessee is liable for penalty u/s. 271(1)(c) of the Act."
2. From the above grounds it would be clear that the only grievance of the assessee relates to the confirmation of penalty of `3,51,000/-levied by the Assessing Officer u/s 271(1)(c) of the Act.
3. The facts related to this issue, in brief, are that the assessee filed her return of income u/s 139(1) of the Act on 5th October 2001 declaring an income of `23,08,457/-. The case was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer asked the assessee to file the details of gift received of `5,00,000/- on 01/05/2000 and `5,00,000/- on 02/05/2000 along with the supporting documents to prove the genuineness of transaction, identity and creditworthiness of the donor. The assessee, vide letter dated 31/12/2002, enclosed the gift deeds and proof of filing of return of income with the Income tax department. The Assessing Officer was not satisfied. He again asked the assessee to prove the identity and creditworthiness of the donors and genuineness of the transactions of gifts. Thereafter, the assessee filed a revised return of income on 13/03/2003 wherein the said gifts totaling to `10,00,000/- had been offered to tax by stating as under:
"That while filing my return, the above mentioned documents had given me the impression that as per law I will prove the identity of the donor, genuineness of the transactions and capacity of the donor. However, I have been advised by my legal advisor that the department due to one reason or the other may not accept the said gift and there may be prolonged litigation on this point.
That since I am not keeping good health in these days, I do not want to fall in unnecessary litigation and to attain peace of mind, I have voluntarily suo-motto and in good faith offered the said amount to tax."
3.1 The Assessing Officer finalized the assessment on 28/03/2003 by observing as under:
"Assessee had taken gift of `20,00,000/- and out of this `10,00,000/- was taken from her mother Smt. Kamlani Bhalla. Besides, gift of `5,00,000/- each was statedly taken from Shri Gajanand Garg and Shri Amit Goyal. However, when asked to prove the identity and creditworthiness of the donor and the genuineness of the transactions, the revised return was filed on 13.03.2003 surrendering this gift worth `10,00,000/-"
3.2 In the computation of income (in the assessment order) the Assessing Officer had added `10,00,000/- separately to the income of the assessee and initiated the penalty proceedings and levied the penalty u/s 271(1)(c) of the Act.
4. Being aggrieved the assessee carried the matter to the learned CIT (A) who pointed out that while deciding the appeal of the assessee, the Assessing Officer was requested to make certain enquiries by the learned CIT (A) on the following directions:
"The Appellant may also be asked to give the details of the donor and she should be confronted with the fact that a person who has gifted a sum of `5,00,000/- cannot be stranger to her and therefore, she was duty bound to give his whereabouts."
4.1 The Assessing Officer, on the direction of the learned CIT (A), sent letters to the alleged donors for verification. One such letter, addressed to one of the donors namely Shri Amit Kumar Goel, was returned back by the postal authorities with the remark that there was no such person. The Assessing Officer made the enquiries with the assessee who replied as under:
"That without prejudice to the above submissions, it is again humbly submitted that I have deposited the tax on these credits before any adverse inference was drawn by dept and on suo motu on my own."
4.2 Thereafter the Assessing Officer sent a letter to Mr. Gajanand Garg, which was returned back by the postal authorities with the remark "not found". The Assessing Officer again asked the assessee for various details. In response to that the assessee, vide letter dated 22/09/2006 submitted as under:
"When I have offered for tax the gift amount, then in my opinion there is no requirement lies on me for producing and confronting with the fact the person who had given me gift, though all their whereabouts have already been submitted before your honour. Your honour may call them directly or may make the enquiries directly from them."
4.3 According to the learned CIT (A), in the present case the assessee could not prove the identity of the donors. He also pointed out that the documents related to the donors filed by the assessee revealed that Shri Gajanand Garg had total income of `53,160/- in the assessment year 1999-2000 and had shown withdrawal of `28,000/-whereas Shri Amit Kumar Goel had total income of `52,110/- and had shown annual withdrawal of `30,000/-. He also pointed out that the computation of income/return of the alleged donors, as filed by the assessee, pertained to financial year 1998-99 whereas the so called gift was given only in financial year 99-2000. thus, those documents had no evidentiary value. According to the learned CIT (A), the assessee had not brought any material on record which could indicate as to how these persons were related to the assessee or as to how there was so much love and affection between them. According to the learned CIT (A), the act of concealment/furnishing of the inaccurate particulars was complete when original return duly verified by the assessee was filed before the department. As regards to the revised return filed on 13/03/2003, which included a sum of `10,00,000/- as income from other sources, the learned CIT (A) pointed out that the revised return was not filed suo motu and/or voluntarily by the assessee. It was filed only when the Assessing Officer had required the assessee to furnish the requisite details. He was of the view that section 139(5) does nothing more than to permit an assessee where it makes a genuine omission or wrong statement to file a revised return in time before the assessment is made. This could only mean that the right to file a revised return can be exercised to cure an omission or wrong statement when it was inadvertent or accidental and not deliberate and such revised return does not save the consequences of knowingly filing a false or incorrect return. The reliance was placed on the following case laws:
(i) Hakam Singh & Others vs. CIT 124 ITR 232 (All)
(ii) Radhey Shyam vs. Addl. CIT [2004] 123 ITR 124 (All)
(iii) Ravi & Cross Objection. Vs. ACIT [2004] 271 ITR 287 (Mad)
(iv) F. C. Agarwal vs. CIT [1975] 102 ITR 410 (Gau)
(v) Agarwal (G.C.) Vs Commissioner of Income-tax 186 ITR 571 (SC)
(vi) Rajan (K.M.), Rajan and Company Vs Commissioner of Income-tax 186 ITR 376 (Ker)
(vii) Sujatha Rubbers Vs Income-tax Officer 194 ITR 355 (AP)
4.4 The learned CIT (A) also referred to the Explnation 1 and 1(b) to section 271(1)(c) of the Act and stated that the said amendments put further onus on the assessee to prove that the explanation furnished by him was bonafide. In this regard, he also made a reference to Board's Circular No. 469 dated 23/09/1986. According to the learned CIT (A), the expression "concealment of income" in its general sense and grammatical meaning, implies that an income is being hidden, camouflaged or covered up so that it cannot be seen, found, observed or disconcerted. According to him the assessee had brought in its undisclosed income through the device of "gifts" which is a non-taxable receipt. He also observed that the expression 'inaccurate' refers to 'not in conformity with the fact or truth' and that is the meaning which is relevant in the context of 'furnishing of inaccurate particulars' and that the expression 'particulars' refers to facts, details, specifies, or information about someone or something. According to him, the plain meaning of the expression 'furnishing of inaccurate particulars of income' implies furnishing of details or information about income which are not in conformity with facts or truth. In the instant case, the assessee showing that she received "gift" was certainly furnishing of inaccurate particulars when in fact there was no such genuine gift, therefore, the assessee failed to advance any reasonable and bonafide explanation with respect to the alleged gifts; rather by accepting the gifts as her income. It has been proved beyond doubt that these so called "gifts" were non-genuine ab initio and filing of the so called "revised return" would not save the consequences of the penal provision. The reliance was placed on the decision of the ITAT, Ahmedabad Bench 'B' in the case of Harilal Thakercy Thakkar Vs. CIT, reported in 87 TTJ (Ahd.) 311. The learned CIT (A) confirmed the action of the Assessing Officer. Being aggrieved, the assessee is in appeal.
5. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the return of income of the assessee was due on 31/10/2001 and the return was filed on 05/10/2001 which was processed u/s 143(1) on 23/11/2002 and the assessee revised the return on 13/03/2003 u/s 139(5) which was within the time and the Assessing Officer thereafter issued another notice u/s 143(2) of the Act. It was further submitted that in the said revised return the assessee suo motu surrendered the gift on the ground that she was not keeping good health and did not want to enter or to fall in unnecessary litigation. It was stated that the tax on the surrendered amount was also paid before completion of the assessment. It was contended that in the revised return the assessee declared the income of `33,08,457/- while the income was assessed u/s 143(3) on an income of `33,11,960/-, so there was addition of `3,500/- only, which was on account of car expenses and registration charges. It was stated that the Assessing Officer had not discussed in the entire assessment order that there was any enquiry made by him. The only fact relating to the return having been revised had been discussed by the Assessing Officer in the order and even in the penalty order passed u/s 271(1)(c) the Assessing Officer had not stated that any enquiry being made by him during the penalty proceedings or after the completion of the assessment. Therefore, it cannot be said that the surrender made by the assessee was not voluntarily. It was further stated that the direction given by the learned CIT (A) were post surrender made by the assessee and when the assessee had already surrendered the gifts qua want of satisfaction, during the course of assessment proceedings itself, and the amount of gift received was not the subject matter of dispute, there remains no purpose of making any enquiry, post surrender because the enquiry would have been purposeful if the same had been conducted during the course of assessment and before the surrender made by the assessee. It was stated that there is no evidence on record of any nature whatsoever that there was any material with the Assessing Officer that may lead to somewhere nearer to the Assessing Officer's finding that the subsequent return filed by the assessee was not voluntary. It was submitted that the Assessing Officer accepting the revised return filed on 13/03/2003 issued notice u/s 143(2)/142(1) dated 17/03/2003 and the assessment had been completed on the income as shown in the revised return and there was nothing in the assessment order to suggest that the revised return was not voluntary. It was contended that the revised return filed by the assessee had not been disbelieved and since there was not much difference between the income as declared by the assessee in the revised return and as assessed by the Assessing Officer, the question of levy of penalty u/s 271(1))(c) does not arise. The reliance was placed on the following case laws:
1. ACIT vs. Vishan Narayan Khanna 171 Taxman 136
2. CIT vs. Rajiv Garg [2008] 175 Taxman 184 (P&H)
3. Smt. Brij Bala Chaudhary vs ITO [2003] 87 ITD 173 (Luck)
4. Santosh Narain Kapoor vs. Dy. CIT [2008] 25 SOT 26 (Luck)
4. Qudai International vs. Income Tax Officer 2009 (13) MTC 622 (Trib)
5. Dy. CIT vs. Tarun Agarwal 2009 (13) MTC 831
6. In his rival submission the learned D. R. strongly supported the orders of the authorities below and further submitted that the surrender made by the assessee was not suo motu rather it was made when the assessee was cornered. As such it cannot be said that the assessee did not conceal the income, therefore, the penalty u/s 271(1)(c) of the Act was rightly levied by the Assessing Officer and confirmed by the learned CIT (A).
7. We have considered the rival submissions and carefully gone through the material available on the record. In the present acase it is noticed that the assessee filed the return of income on 05/10/2001 declaring an income of `23,08,457/- which was processed u/s 143(1) on 23/11/2002. Thereafter, the case was selected for scrutiny. In the meantime the assessee revised the return of income on 13/03/2003 u/s 139(5) of the Act before completion of the assessment and it is not the case of the Department that the revised return filed by the assessee was beyond time. In the said revised return the assessee surrendered the amount of `10,00,000/- which was earlier shown as gifts received by the assessee. While surrendering the amount of `10,00,000/- in the revised return, the assessee mentioned as under:
That since I am not keeping good health in these days, I do not want to fall in unnecessary litigation and to attain peace of mind, I have voluntarily suo motu and in good faith offered the said amount to tax."
7.1 From the above it would be clear that the assessee surrendered the amount of `10,00,000/- to avoid the unnecessary litigation and to attain peace of mind. Before the said surrender nothing was brought on record that the addition of said amount was to be made. Even at the time of framing the assessment u/s 143(3) of the Act vide order dated 28/03/2003, the Assessing Officer while computing the income of the assessee added `10,00,000/- by mentioning "income from other sources – credit/gift surrendered as per revised return `10,00,000/-". From the above noting of the Assessing Officer, it is crystal clear that the Assessing Officer admitted that the assessee surrendered the amount in the revised return, so it cannot be said that the said addition was made by the Assessing Officer by detecting any concealment of income by the assessee or on account of furnishing of inaccurate particulars of income, rather the addition was made inspite of the fact that the assessee had already suo motu surrendered the amount of `10,00,000/- in her revised return. The said return was filed by the assessee suo motu voluntarily within time allowable u/s 139(5) of the Act, so it cannot be said that the assessee concealed the income or furnished inaccurate particulars of income which is the requirement of levying the penalty u/s 271(1)(c) of the Act. In the instant case, the assessee although furnished all the documents relating to the gift in the shape of gift deeds along with the affidavit of the donors, copy of their PAN cards, acknowledgement of returns filed by the donors and the copies of balance sheet proving the genuineness of the gift but since the assessee was not keeping good health and did not want any confrontation and unnecessary litigation with the department, so to attain peace of mind, the return of income was revised surrendering the amount of `10,00,000/- which was earlier shown as gifts. The assessee also offered tax on the said amount of surrender therefore, it cannot be said that the assessee either concealed the income or furnished inaccurate particulars of income. As such, the penalty u/s 271(1)(c) was not lleviable to the facts of the present case.
7.2 In the case of Qudai International vs. Income Tax Officer 2009 (13) MTC 622 (Trib), the ITAT Lucknow Bench 'A' held that "mere raising of query by the Assessing Officer did not amount to detection of concealment. It cannot therefore, be said that the revised return was filed after detection of concealment and was not voluntary. The term "detection" itself implies the Assessing Officer had reached a conclusion but the query raised by the Assessing Officer was only first step in detection of concealment. If the assessee voluntarily revised the return, it could not be said that it does not fulfill requirements of section 139(5) of the Act." The facts of the present case are also similar to the facts of the aforesaid referred to case.
7.3 Similarly, in the case of Dy. CIT vs. Tarun Agarwal 2009 (13) MTC 831, the ITAT Lucknow Bench 'A' held that "the assessee had surrendered the amount before any specific detection of undisclosed income or even before the issue of notice. Even though a general enquiry was going on and notices had been issued to some of his relatives and the amount might have been surrendered because of compulsion of circumstances, it was not sufficient to penalise the assessee as the factum of detection was not there." In the present case also, nothing is brought on record that there was any detection at the level of the Assessing Officer to suggest that the assessee concealed the income amounting to `10,00,000/- which was offered for taxation suo motu in the revised return.
7.4 On a similar case the penalty u/s 271(1)(c) was deleted by the ITAT Lucknow Bench 'A' in the case of Santosh Narain Kapoor vs. Dy. CIT [2008] 25 SOT 26 (Luck) by holding as under (head note):
"Whether since in instant case, there was no investigation of assessee by investigation wing of department and also there was no information with Assessing Officer that gift/credits were fake or bogus on dates when assessee had surrendered amounts voluntarily and there was also no material on record to establish that assessee had furnished inaccurate particulars of his income in original return, it could be said that Assessing Officer had not discharged his burden of proving concealment - Held, yes -Whether therefore, penalty levied by Assessing Officer was not justified and was liable to be deleted - Held, yes."
7.5 The facts of the present case are similar to the facts involved in the aforesaid referred to case decided by the ITAT, Lcknow Bench. We, therefore, by taking into consideration the view taken by the various coordinate Benches of the ITAT in the aforesaid referred to cases, are of the view that no penalty u/s 271(1)(c) of the Act is leviable in the facts of the present case.
8. Now we will deal with the appeal in I.T.A. No.309/Luc/10.
8.1 The only grievance of the assessee in this appeal relates to the confirmation of penalty of `1,77,663/- levied by the Assessing Officer u/s 271(1)(c) of the Act.
8.2 The facts related to this issue, in brief, are that the assessee filed his return of income on 29/10/2007 declaring an income of `15,96,205/-. The case was selected for scrutiny. During the course of assessment proceedings, the assessee has furnished a copy of her bank account with Standard Chartered Bank. The Assessing Officer noticed that it had a credit entry of `5,00,000/- on May 4, 2000 with a remark "gift". On enquiry, the assessee vide his letter 31/12/2002 submitted as under:
"Gift of `5,00,000/- was received from our family friend Mr. Mahadev Bansal of Delhi vide Demand Draft dated 01/05/2000 – copy of gift deed along with gift confirmation, PAN Card photocopy, ration card photocopy, B/S, Income Tax computation, acknowledgement of filing of return of income, income tax order u/s 143(1), Wealth Tax computation, bank statement copy through which draft got prepared (is) enclosed for your honour's reference."
8.3 Thereafter the Assessing Officer, vide his letter dated 28/01/2003 had written to the donor Shri Madadev Prasad Bansal to submit certain details with respect to amount given by him as gift. He also wrote a letter dated 27/01/2007 to the Branch Manager, State Bank of Patiala, Dariyaganj, New Delhi that was the same bank branch from which `5,00,000/- gift had been purportedly given to the assessee. Vide letter dated 27/01/2003, the Branch Manager of the said bank, informed the Assessing Officer as under:
"Please refer to your letter. In this connection, we advise that no such SB A/c is maintained in our branch in the name of Shri Mahadev Prasad Bansal S/o Late Shri Phool Chand Bansal, r/o A-98/3, Dilshad Colony, Delhi (A/c 01190003669). However, the a/c is in the name of Shri Harish Grover…."
8.4 In the meanwhile the assessee revised the return of income on 13/03/2003 declaring a total income of `20,96,205/- wherein `5,00,000/- (credit in Standard Chartered Bank) was offered for tax. Thereafter the Assessing Officer issued notice u/s 142(1) dated 17/03/2003 requiring the assessee to furnish reasons for revising the return. The assessee submitted as under:
"(1) That I have revised my return for the A.Y.2001-02 by taking the bank deposit of `5,00,000/- with Standard Chartered Bank, Kanpur a/c No.622-1-001617-5.
(1) That I have deposited the tax amount of `2,19,938/-along with interest as applicable under the law on 13.3.2003.
(2) That this deposit I have received vide draft No.150185 drawn on State Bank of Patiala branch Daryaganj, New Delhi-110002 dated 1.5.2000 for `5,00,000/- from my family friend Mr. Vinod Garg, s/o late Shri R.S. Garg R/o B-1155, Shastri Nagar, Delhi-110 052 as a gift towards his natural love and affection towards me and the gift was without any consideration.
(4) That the donor has sent me along with the draft of gift the following documents: same enclosed
(a) Gift deed
(b) Affidavit towards making the Gift.
(c) Income Tax Return filing proof in shape of acknowledgment of Return filing.
(d) Balance Sheet as on 31.3.99
(e) PAN Card photocopy
(f) Ration Card photocopy
(g) Wealth Tax Return filing proof
(h) Income Tax order u/s 143(1)
(i) Bank statement copy
(3) That by mistake Mr. Mahavir Prasad Bansal, s/o late Phool Chand, R/o A-98/3, Dilshad Colony-110 095, the brother in law of Mr. Vinod Garg has sent me the documents as mentioned in next column along with the draft under wrong impression of treating that the draft has been prepared by him when the typing mistake has taken place in the documents got prepared by his accountant. Mr. Mahadev Prasad Bansal has also made a gift of similar amount to one of the common friends.
(6) That Mr. Bansal has sent me along with the draft of gift the following documents under the wrong impression:
(d) Balance sheet as on 31.3.99.
(g) Wealth Tax return filing proof.
(h) Income Tax order u/s 143(3)
(7) That while filing my return the above mentioned documents has, given me the impression that as per law I will prove the identity of the donor, genuineness of the transactions and capacity of the donor. However now I have been advised by my legal advisor that the department due to one reason or the other may not accept the said gift and there may be prolonged litigation on this point.
(8) That since I am not keeping good health in these day, I do not want to fall in unnecessary litigation and to attain peace of mind, I have voluntarily, suo motu and in good faith offered the said amount for tax.
(9) That since I have revised my return by offering the above mentioned deposit for tax, it is humbly requested that the assessment of the humble assessee may kindly be finalized at the earliest and no adverse action my be taken."
8.5 The Assessing Officer framed the assessment on 28/03/2003 and in the computation of income added a sum of `5,00,000/- with the remark gift surrendered as revised return. Thereafter, the Assessing Officer initiated the penalty proceedings u/s 271(1)(c) of the Act and levied the impugned penalty.
9. The assessee carried the matter to learned CIT(A) who confirmed the action of the Assessing Officer. Being aggrieved, the assessee is in appeal.
10. The facts of the present case are similar to the facts involved in the case of Smt. Aparna Singh in I.T.A. No.310/Luc/10. The said case we have already adjudicated in the former part of this order and even the rival submissions were similar as were in the aforesaid referred to case. Therefore, our findings given in former part of this order while deciding the appeal of Smt. Aparna Singh in I.T.A. No.310/Luc/10 for the assessment year 2001-2002 shall apply mutatis mutandis. In that view of the matter, the penalty levied by the Assessing Officer and confirmed by the CIT (A) is deleted.
(The order was pronounced in the open court on 07/01/2011)
Sd/. Sd/.
( H. L. KARWA ) (N. K. SAINI)
Posted by Rajkumar at 8:06:00 PM 0 comments
Labels: Favor Revenue, Section 271(1)(c)