IT: Where assessee admitted undisclosed income found during search and he was ready to make payment of tax, no penalty was to be levied
■■■
[2013] 38 taxmann.com 260 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax -1, Kanpur
v.
Sidh Nath Geol*
SUNIL AMBWANI AND SURYA PRAKASH KESARWANI, JJ.
IT APPEAL NO.143 OF 2009†
SEPTEMBER 10, 2013
Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income [Explanation 5] - Assessment year 1992-93 - During search assessee had admitted fact of undisclosed income found and was ready to pay tax - Tribunal found that it was not a case of concealment in terms of Explanation 5 to section 271(1)(c) and, therefore, no further detail was required nor any further explanation was required to be given as to how and in what manner and in which year or years undisclosed income was earned and as to why tax was not paid on such undisclosed income - Tribunal held that no penalty was to be levied - Whether Tribunal's decision was proper - Held, yes [Para 8] [In favour of assessee]
FACTS
| ■ | A search was conducted under section 132 where it was found that assessee had concealed particulars of income and furnished inaccurate particulars of his income of Rs. 5,39,300 as unexplained investment on renovation of house and Rs. 82,000 as unexplained income from pawning business, thereby penalty had been levied under section 271(1)(c). | |
| ■ | On appeal, the Commissioner (Appeals) found that sum of Rs. 5,39,300 would not have generated in one single year, it is also the part of income which has been concealed with a design. Department had to resort to ultimate action in its armoury, i.e., resorted to the search and seizure operation. He upheld the order of the Assessing Officer. | |
| ■ | On second appeal, the Tribunal held that since assessee accepted the undisclosed income and surrendered the amount in the statement recorded during course of search and was ready to pay taxes on those amount thus, the penalty was deleted. | |
| ■ | On revenue's appeal: |
HELD
| ■ | Clause (2) of Explanation 5 to section 271(1)(o) makes it clear that where in the course of search the assessee makes a statement under section 132(4) and owns that he acquired any of such assets out of his undisclosed income, not so far returned, and further states the manner in which such income has been derived and pays tax together with interest if any in respect of such income, no presumption of concealment has to be drawn, notwithstanding the admission to that effect. In other words to the extent the assessee makes a clean breast of his undisclosed income represented by assets found to be in the possession of the assessee he is not deemed to have concealed his income or concealed particulars thereof. The explanation is not confined to physical possession but extends to other forms of possession. [Para 7] | |
| ■ | In the present case a note book was found in which details of expenses of renovation of residence were written. The assessee stated that he had made the expenditure out of business income but had not noted in his books of account. As per note book, the total came to Rs. 5,39,300 which the assessee, in respect to question No. 1, admitted to be undisclosed income of the financial year 1991-92 and on which he was ready to pay the tax. It is admitted that the statement was made during the course of search and the assessee was ready to make payment of tax. No further detail was required nor any further explanation was required to be given as to how and in what manner and in which year or years the undisclosed income was earned and as to why the tax was not paid on such undisclosed income. [Para 8] | |
| ■ | The question of law is thus decided in favour of the assessee and against the revenue. [Para 9] |
CASE REVIEW
CIT v. S.D.V. Chandru [2004] 266 ITR 175/136 Taxman 537 (Mad.); CIT v. Mishrimal Soni [2007] 289 ITR 77/162 Taxman 53 (Raj.) and CIT v.Mahendra C. Shah [2008] 299 ITR 305/172 Taxman 58 (Guj.) (para 9) followed.
CASES REFERRED TO
CIT v. S.D.V. Chandru [2004] 266 ITR 175/136 Taxman 537 (Mad.) (para 7), CIT v. Mishrimal Soni [2007] 289 ITR 77/162 Taxman 53 (Raj.)(para 7) and CIT v. Mahendra C. Shah [2008] 299 ITR 305/172 Taxman 58 (Guj.) (para 7).
S. Chopra for the Appellant. A. Bansal and S.K. Garg for the Respondent.
JUDGMENT
1. We have heard Shri Dhananjai Awasthi, learned counsel appearing for the department. Shri Ashish Bansal appears for the respondent-assessee.
2. This Income Tax Appeal filed under Section 260-A of the Income Tax Act arises from an order of Income Tax Appellate Tribunal, Lucknow Bench "B", Lucknow dated 07.11.2008 for the assessment year 1992-93.
3. The appeal has been preferred by the department on substantial question of law as follows:—
| "1. | Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal was justified in law in deleting the penalty of Rs.5,00,000/- imposed by the AO u/s 271 (1) (c) of the Act and confirmed by the ld. CIT (Appeals)-II, Kanpur without appreciating that the surrender made on a/c of undisclosed income for A.Y. 1992-93 during the course of search and seizure operation conducted on 17.10.1994, was made much after the due date of filing of return of income u/s 139 (1) of the Act as well as after completion of original assessment proceedings u/s 143 (3) of the Act on 24.03.1994, and therefore, the act of concealment was completed for failure not to disclose the said undisclosed income either in his original return of income or at the time of assessment proceedings u/s 143 (3) of the Act and penalty is leviable in terms of Explanation 5 to section 271(1)(c) of the Act." |
4. In the proceedings under Section 271(1)(c) of Act the Income Tax Officer levied penalty on the ground that the assessee had concealed particulars of income and furnished inaccurate particulars of his income of Rs.5,39,300/- as unexplained investment on renovation of house, and Rs.82,000/- as unexplained income from pawning business.
5. The CIT(A) upheld the order on the reasoning given as follows:—
"5. The Ld. counsel of the appellant has argued before me that since it is the first default of the appellant, minimum penalty should be levied. From the perusal of statement it is clear that the appellant has been concealing his income year after year particularly with regard to the investment in pawning business. Same is true about the investment in renovation of house. Sum of Rs.5,39,300/- would not have generated in one single year, it is also the part of income which has been concealed with a design. Department had to resort to ultimate action in its armoury i.e. resorted to the search and seizure operation. The appellant has been cought squarely, he deserves no leniency.
In the result the appeal is dismissed."
6. The ITAT found that the assessee, during the course of search, gave a statement accepting Rs.5,39,300/- as undisclosed income of financial year 1991-92 and accepted to pay tax on the same. Paragraph 6 and relevant para 6.1 are quoted:—
"6. We have considered the submissions of both the parties and carefully gone through the materials available on record. In the instant case it is not in dispute that statement of the assessee was recorded during the course of search and in the said statement the assessee surrendered the amount which is clear from the answer to the question No.10 which the learned CIT (A) has reproduced at page No.2 of the impugned order. The said question and answer read as under:
Q. No.10 : In reply to question No.7, you have told that the investment is out of business income and now you are saying that the same is out of yourself and your family's savings. Please clarify the same.
Ans. I accept Rs.5,39,300/- as undisclosed income of financial year 1991-92 and I am ready to pay tax etc. on the same.
6.1. From the above it is crystal clear that the assessee accepted the discrepancy and surrendered the amount in the statement recorded during the course of search. He was also ready to pay the taxes on those amounts. Therefore, it cannot be said that the surrender was not made during the course of search."
7. The ITAT relied upon judgments of Madras High Court in CIT v. S.D.V. Chandru [2004] 266 ITR 175/136 Taxman 537;and Rajasthan High Court in CIT v. Mishrimal Soni [2007] 289 ITR 77/162 Taxman 53 and Gujarat High Court in CIT v. Mahendra C. Shah [2008] 299 ITR 305/172 Taxman 58, which have explained the extent and scope of Explanation 5 to Section 271(1)(c) of the Act, which deals with a situation in which any assets are found to be in the ownership of the assessee in the course of search under Section 132 of the Act. Clause (2) of Explanation 5 makes it clear that where in the course of search the assessee makes a statement under Section 132 (4) and owns that he acquired any of such assets out of his undisclosed income, not so far returned, and further states the manner in which such income has been derived and pays tax together with interest if any in respect of such income, no presumption of concealment has to be drawn, notwithstanding the admission to that effect. In other words to the extent the assessee makes a clean breast of his undisclosed income represented by assets found to be in the possession of the assessee he is not deemed to have concealed his income or concealed particulars thereof. The explanation is not confined to physical possession but extends to other forms of possession.
8. In the present case a note book was found in which details of expenses of renovation of residence were written. The assessee stated that he had made the expenditure out of business income but had not noted in his books of account. As per note book, the total came to Rs.5,39,300/- which the assessee, in respect to question no.1, admitted to be undisclosed income of the financial year 1991-92 and on which he was ready to pay the tax. It is admitted that the statement was made during the course of search and the assessee was ready to make payment of tax. No further detail was required nor any further explanation was required to be given as to how and in what manner and in which year or years the undisclosed income was earned and as to why the tax was not paid on such undisclosed income.
9. We find that question of law is covered by the judgments of Madras High Court, Rajasthan High Court and Gujarat High Court as quoted above with which we respectfully agree. The question of law is thus decided in favour of the assessee and against the revenue.
10. The Income Tax Appeal is dismissed.
Regards
Prarthana Jalan
__._,_.___
No comments:
Post a Comment