M/S. P.S. ASSOCIATES, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, JAIPUR

ITA 1452/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8454 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 14-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K MAHALA JCIT DHK
• Keywords: Search and seizure; Bonafide belief; Bonafide mistake
• Section: 271(1)(c); 143(3); 153A; 132

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH JES'K LH- 'KEKZ] YS[KK LNL; ,O A H JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA- @ ITA NOS. 1452 TO 1454/JP/2018) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2006-07 TO 2008-09. M/S. P.S. ASSOCIATES, C-190A, SUNDAR MARG, TILAK NAGAR, JAIPUR. CUKE VS. THE ACIT, CIRCLE-3, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABAP 6339 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ROHAN SOGANI (CA) & SHRI RAJEEV SOGANI (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI A.K. MAHALA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 09.04.2019. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 11 /04/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED A GAINST THE COMPOSITE ORDER OF LD. CIT (A)-4, JAIPUR DATED 28 TH SEPTEMBER, 2018 ARISING FROM PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE IT ACT FOR TH E ASSESSMENT YEARS 2006-07 TO 08-09 RESPECTIVELY. THE ASSESSEE HAS RAISED COMMON GROUNDS IN THESE APPEALS EXCEPT THE QUANTUM OF PENALTY. THE GROUND RAISED F OR THE ASSESSMENT YEAR 2006-07 ARE REPRODUCED AS UNDER :- 2 ITA NOS. 1452 TO 1453/JP/2018 M/S. P.S. ASSOCIATES, JAIPUR. 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN CONFIRMING THE PENALTY AMOUNTING T O RS. 1,63,770/- IMPOSED BY LD. AO U/S 271(1)(C) OF THE I NCOME TAX ACT, 1961. THE ACTION OF LD. CIT (A) IS ILLEGAL, UN JUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETING THE SAID PENALTY OF RS. 1,63,77 0/-. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT (A) HAS ERRED IN CONFIRMING THE PENALTY U/S 271(1)( C) IMPOSED BY LD. AO WITHOUT SPECIFICALLY POINTING OUT WHETHER THE PENALTY WAS PROPOSED ON CONCEALMENT OF PARTICULARS OF INCOM E OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE AC TION OF THE LD. CIT (A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAI NST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE PENALTY IMPOSED U/S 271(1)(C). 3. THE ASSESSEE CRAVES ITS RIGHT TO ADD, AMEND OR A LTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 2. THE ASSESSEE IS AN ASSOCIATION OF PERSONS COMPRI SING OF 5 MEMBERS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE ACTIVITIES AND HAD NOT FILED RETURN OF INCOME FOR THESE THREE ASSESSMENT YEARS UNDER SE CTION 139(1) OF THE IT ACT. THERE WAS A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE ACT ON 28 TH APRIL, 2011 IN CASE OF SUPREME GROUP TO WHOM THE ASSESSEE BELONGS. DURING THE SEARCH AND SEIZURE ACTION CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AT THE RESIDENTIAL PREMISES OF SHRI ASHWANI SAXENA, JAIPUR DISCLOSING THE TRANSACTIONS OF REAL ESTATE BY THE ASSESSEE. DURING THE POST SEARCH ENQUIRY IN RE SPECT OF THESE SEIZED MATERIAL PAGES 8 TO 31 OF EXHIBIT-7 ANNEXURE-BS, ONE OF THE MEMBERS OF THE ASSESSEE AOP HAS ADMITTED UNDISCLOSED INCOME AMOUNTING TO RS. 11 ,43,000/- IN THESE THREE ASSESSMENT YEARS, DETAILS OF THE UNDISCLOSED INCOME ADMITTED BY THE ASSESSEE ARE AS UNDER :- 3 ITA NOS. 1452 TO 1453/JP/2018 M/S. P.S. ASSOCIATES, JAIPUR. ASSESSMENT YEAR UNDISCLOSED INCOME (RS.) 2006 - 07 5,30,000/ - 2007 - 08 4,68,000/ - 2008 - 09 1,45,000/ - TOTAL 11,43,000/ - IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 153A OF THE ACT FOR THESE THREE ASSESSMENT YEARS, THE ASSESSEE FILED ITS RETURN OF INCOME ON 13 TH MARCH 2014 AND OFFERED THE UNDISCLOSED INCOME SURRENDERED DURING T HE POST SEARCH ENQUIRY FOR THESE THREE YEARS. THE AO WHILE COMPLETING THE ASSESSMEN T UNDER SECTION 153C READ WITH SECTION 143(3) OF THE ACT HAS ACCEPTED THE RETURNED INCOME WHEREIN THE ASSESSEE OFFERED THE UNDISCLOSED INCOME TOTAL AMOUNTING TO R S. 11,43,000/- FOR THESE THREE ASSESSMENT YEARS. THE AO INITIATED THE PENALTY PRO CEEDINGS UNDER SECTION 271(1)(C) AND LEVIED THE PENALTY VIDE ORDER DATED 18 TH SEPTEMBER, 2014 AS UNDER :- ASSESSMENT YEAR PENALTY LEVIED U/S 271(1)(C) 2006 - 07 1,63,770/ - 2007 - 08 1,43,210/ - 2008 - 09 44,810/ - TOTAL 3,51,790 / - AGGRIEVED BY THE ACTION OF THE AO, THE ASSESSEE FIL ED THE APPEAL BEFORE THE LD. CIT (A) AND CONTENDED THAT DUE TO BONAFIDE BELIEF, THE ASSESSEE COULD NOT FILE ANY RETURN OF INCOME AS THE ASSESSEE WAS UNDER THE IMPRESSION THAT THE INCOME EARNED FROM THE TRANSACTION OF PURCHASE AND SALE OF LAND/PROPER TY WAS USED IN THE BUSINESS ITSELF BY PURCHASING ANOTHER PROPERTY AND, THEREFORE, IT W AS NOT THE INCOME LIABLE TO TAX. THE LD. CIT (A) DID NOT ACCEPT THE SAID EXPLANATION OF THE ASSESSEE AND CONFIRMED THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 4 ITA NOS. 1452 TO 1453/JP/2018 M/S. P.S. ASSOCIATES, JAIPUR. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS REITE RATED HIS CONTENTION AS RAISED BEFORE THE LD. CIT (A) AND SUBMITTED THAT DUE TO BO NAFIDE BELIEF THE ASSESSEE COULD NOT FILE THE RETURN OF INCOME UNDER SECTION 139(1). HOWEVER, THE ASSESSEE HAS OFFERED THE INCOME FROM THE TRANSACTIONS OF PURCHAS E AND SALE OF LAND/PROPERTY ONCE THE ASSESSEE REALIZED THAT THE INCOME TAX RETURN SH ALL BE REQUIRED TO BE FILED. HE HAS FURTHER SUBMITTED THAT THE AO HAS NOT MADE ANY ADDITION BUT RETURNED INCOME WAS ACCEPTED BY THE AO WHILE COMPLETING THE ASSESSM ENT UNDER SECTION 153C. ALL THE MEMBERS OF THE AOP WERE THE FAMILY MEMBERS/FRIE NDS. THEY WERE INDIVIDUALLY INVOLVED IN INVESTMENT ACTIVITY IN REAL ESTATE. TH E MEMBERS WERE ACCOMMODATING EACH OTHER FOR MAKING AVAILABLE THE FUNDS. THE AOP AFTER SELLING OF PARTICULAR LAND/PROPERTY AGAIN MADE FRESH INVESTMENT OUT OF SA LE PROCEEDS OF THE EARLIER INVESTMENT. THEREFORE, THE ASSESSEE WAS UNDER THE IMPRESSION THAT NO TAX IS PAYABLE IF THE SALE PROCEEDS ARE AGAIN INVESTED IN REAL ESTATE. THE LD. A/R HAS CONTENDED THAT UNDER THIS BONAFIDE BELIEF THE ASSES SEE DID NOT FILE THE RETURN OF INCOME ON THE CAPITAL GAIN EARNED ON THE TRANSACTIO N OF REAL ESTATE. HE HAS FURTHER SUBMITTED THAT THE EXPLANATION 5A TO SECTION 271(1) (C) CAN BE INVOKED ONLY WHEN THERE IS A CONCEALMENT OF INCOME OR FURNISHING OF I NACCURATE PARTICULARS OF INCOME. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT, 348 ITR 306 (SC) AND SUBMITTED THAT IF THE ASSESSEE HAS COMMITTED AN ERR OR DUE TO BONAFIDE BELIEF THEN THE PENALTY UNDER SECTION 271(1)(C) CANNOT BE LEVIE D. HE HAS ALSO RELIED UPON THE DECISION IN CASE OF CIT VS. RELIANCE PETRO PRODUCTS P. LTD., 322 ITR 158 (SC) AND SUBMITTED THAT ANY CLAIM WHICH IS NOT ACCEPTABLE AS PER THE PROVISIONS OF THE ACT WOULD NOT LEAD TO CONCEALMENT OF INCOME OR FURNISHI NG INACCURATE PARTICULARS OF 5 ITA NOS. 1452 TO 1453/JP/2018 M/S. P.S. ASSOCIATES, JAIPUR. INCOME. THE LD. A/R HAS ALSO RELIED UPON THE DECIS ION IN CASE OF MOTILAL PADAMPAT SUGAR MILLS CO. LTD. VS. STATE OF UTTAR PRADESH, 11 8 ITR 326 (SC) AND SUBMITTED THAT EVERYONE IS NOT PRESUMED TO KNOW THE LAW. THERE IS NO SUCH MAXIM KNOWN TO THE LAW. THEREFORE, IF THE ASSESSEE UNDER THE BONAFIDE BELIEF HAS NOT OFFERED THE INCOME TO TAX, THE SAME WOULD NOT AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T IT IS A CLEAR CASE OF CONCEALMENT OF INCOME BY THE ASSESSEE AS THE ASSESS EE HAS NOT FILED THE RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT AND ONLY WHE N A SEARCH AND SEIZURE ACTION WAS CARRIED OUT AND IT WAS DETECTED THAT THE ASSESS EE HAS EARNED THE INCOME FROM THE TRANSACTION OF REAL ESTATE, THE ASSESSEE SURREN DERED THE INCOME. THUS BUT FOR THE SEARCH AND SEIZURE ACTION AND DETECTION OF THE UNDI SCLOSED INCOME ASSESSEE WOULD NOT HAVE FILED ANY RETURN OF INCOME EVEN FOR THE SU BSEQUENT ASSESSMENT YEARS. HENCE THE EXPLANATION OF THE ASSESSEE THAT THE ASSE SSEE WAS UNDER BONAFIDE BELIEF IS WITHOUT ANY BASIS. HE HAS RELIED UPON THE ORDER S OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE CASE IS FULLY COVERED UNDER EXPL ANATION 5A TO SECTION 271(1)(C) OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE FOR THESE THREE ASSESS MENT YEARS THAT THE ASSESSEE DID NOT FILE RETURN OF INCOME UNDER SECTION 139(1) OF T HE ACT AND EVEN TILL THE DATE OF SEARCH AND SEIZURE ACTION UNDER SECTION 132 ON 28 TH FEBRUARY, 2011. ONLY AFTER THE DEPARTMENT DETECTED UNDISCLOSED INCOME BASED ON THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH, THE ASSESSEE ADMITTED UNDISCLOSED INCOME AND SURRENDERED THE SAME TO TAX. THUS THE QUESTION OF BONAFIDE BELIEF OR INADVERTENT 6 ITA NOS. 1452 TO 1453/JP/2018 M/S. P.S. ASSOCIATES, JAIPUR. MISTAKE DOES NOT ARISE IN THE CASE OF THE ASSESSEE WHEN THE ASSESSEE HAS EVEN NOT FILED THE RETURN OF INCOME FOR ANY OF THE ASSESSMEN T YEARS UNDER CONSIDERATION. FURTHER, THE EXPLANATION OF THE ASSESSEE BEING BONA FIDE MISTAKE OR BELIEF CAN BE CONSIDERED IF THERE IS A REASONABLE BASIS FOR BELIE VING THAT THE INCOME EARNED BY THE ASSESSEE IS NOT LIABLE TO TAX. THE ASSESSEE HAS NO T EXPLAINED ANY BASIS FOR SUCH BONAFIDE BELIEF THAT THE INCOME EARNED BY THE ASSES SEE IS NOT LIABLE TO TAX. THE ONLY EXPLANATION OF THE ASSESSEE IN THIS CASE IS THAT TH E ENTIRE INCOME WAS REINVESTED IN MAKING PURCHASES IN REAL ESTATE. EVEN IF THAT FACT IS ACCEPTED, IT WOULD NOT GIVE RISE TO ANY BELIEF MUCH LESS THE BONAFIDE BELIEF THAT TH E INCOME EARNED BY THE ASSESSEE FROM THE ACTIVITY OF REAL ESTATE BUSINESS IS NOT LI ABLE TO TAX. THIS IS NOT A CASE OF MISTAKE IN FILING THE RETURN OF INCOME EITHER NOT I NCLUDING SOME INCOME OR MAKING SOME INCORRECT CLAIM OF DEDUCTION IN THE RETURN OF INCOME BUT THE TRANSACTIONS WERE DULY RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSE E HAS NEITHER SHOWN THAT THESE TRANSACTIONS WERE DULY RECORDED IN THE BOOKS OF ACC OUNT REGULARLY MAINTAINED NOR HAS FILED ANY RETURN OF INCOME FOR ALL THESE YEARS AND, THEREFORE, IT IS NOT A STRAY INSTANCE OF NOT FILING OF RETURN FOR A PARTICULAR A SSESSMENT YEAR BUT THE ASSESSEE DID NOT FILE RETURN OF INCOME FOR THESE ASSESSMENT YEAR S. THEREFORE, A PERSISTENT DEFAULT ON THE PART OF THE ASSESSEE FOR NOT FILING THE RETU RN OF INCOME RULES OUT THE POSSIBILITY OF ANY BONAFIDE OR INADVERTENT MISTAKE OR BELIEF AS CLAIMED BY THE ASSESSEE. THE EXPLANATION 5A TO SECTION 271(1)(C) CREATES A DEEMING FICTION REGARDING CONCEALMENT OF PARTICULARS OF INCOME OR F URNISHING INACCURATE PARTICULARS OF INCOME IRRESPECTIVE OF THE FACT THAT THE ASSESSE E HAS DECLARED IN THE RETURN OF INCOME AFTER SEARCH. THEREFORE, ALL THE CONDITIONS AS STIPULATED UNDER EXPLANATION 5A TO SECTION 271(1)(C) ARE SATISFIED IN THE CASE OF T HE ASSESSEE AND CONSEQUENTLY THE 7 ITA NOS. 1452 TO 1453/JP/2018 M/S. P.S. ASSOCIATES, JAIPUR. SAID EXPLANATION IS APPLICABLE IN RESPECT OF THE IN COME WHICH WAS DISCLOSED ONLY AFTER SEARCH AND SEIZURE ACTION AND BASED ON SEIZED MATER IAL. THE LD. CIT (A) HAS CONSIDERED THIS ISSUE IN PARA 5 OF THE IMPUGNED ORD ER AS UNDER :- 5. I HAVE PERUSED THE ORDER OF AO AND COMMON SUBM ISSIONS MADE BY THE AUTHORIZED REPRESENTATIVE. THE APPELLANT HAS NOT FILED HIS REGULAR RETURN U/S 139(1) OF THE ACT. THE APPELLANT DISCLOSED ADDITIONAL INCOME ON ACCOUNT OF CAPITAL GAIN INCOME WHICH WAS OFFERED IN THE RETURN FILED U/S 153A. THE AO ACCEPTED THE RETURN FILED U/S 153A AND ASSESSED AT THE SAME INCOME. SUBSEQUENTLY THE AO IM POSED PENALTY U/S 271(1)(C). I FIND THAT IN THE INSTANT CASE THE EXPLANATION 5 I S SQUARELY ATTRACTED. SAME IS TO BE REFERRED AS UNDER : [EXPLANATION 5A. WHERE, IN THE COURSE OF A SEARCH INITIATED UNDER SECTION 132 ON OR AFTER THE 1 ST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE THE OWNER OF (I) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ART ICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSET S) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING (WHOLLY OR IN PART) HIS INCOME FOR ANY PR EVIOUS YEAR; OR (II) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOU NT OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH E NTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRESENTS HIS INCOME (WHOLLY OR IN PART) FOR ANY PREVIOUS YEA R, WHICH HAS ENDED BEFORE THE DATE OF SEARCH AND, - (A) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YEAR H AS BEEN FURNISHED BEFORE THE SAID DATE BUT SUCH INCOME HAS NOT BEEN DECLARED THEREIN; OR 8 ITA NOS. 1452 TO 1453/JP/2018 M/S. P.S. ASSOCIATES, JAIPUR. (B) THE DUE DATE FOR FILING THE RETURN OF INCOME FOR SU CH PREVIOUS YEAR HAS EXPIRED BUT THE ASSESSEE HAS NOT FILED THE RETU RN, THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUS E OF SUB-SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED TH E PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME.] THEREFORE, WHEN THE ASSESSEES CASE IS COVERED BY T HE SAID EXPLANATION 5A, THEN THE DECISION RELIED UPON BY THE ASSESSEE WILL NOT HELP THE CASE OF THE ASSESSEE AS IT IS NEITHER A CASE OF BONAFIDE MISTAKE NOR A CASE OF BO NAFIDE BELIEF BUT IT IS A CONTINUES DEFAULT ON THE PART OF THE ASSESSEE FOR NOT FILING EVEN RETURN OF INCOME DESPITE THE ACTIVITY IN THE REAL ESTATE AND EARNING THE INCOME THEREFROM. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT (A). 6. IN THE RESULT, APPEALS OF THE ASSESSEE ARE DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/04/201 9. SD/- SD/- JES'K LH- 'KEKZ ] FOT; IKY JKWO ( RAMESH C. SHARMA ) ( VIJAY PAL RAO ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/04/2019. DAS/ 9 ITA NOS. 1452 TO 1453/JP/2018 M/S. P.S. ASSOCIATES, JAIPUR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-M/S. P.S. ASSOCIATES, JAIPUR. 2. IZR;FKHZ Z@ THE RESPONDENT-THE ACIT CIRCLE-3, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1542 TO 1454/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR