DCIT, CHENNAI V. M/s. S M J Housing, CHENNAI

ITA 2142/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4969 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: T BANUSEKAR
• Keywords: Business income; Reasonable cause
• Section: 273B; 143(3); 142(1); 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D BEFORE DR.O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER I.T.A. NO. 2142/MDS/2010 THE DEPUTY DIRECTOR OF INCOME TAX CENTRAL CIRCLE II(1) 46, M.G. ROAD CHENNAI 600 034. VS M/S S.M.J HOUSING [PARTNER OF SHRI S. SUBASH CHAND NAHAR 6/1, NAHAR DRIVE MAHARANI CHINNAMMA ROAD ALWARPET, CHENNAI-34 PAN : ABBFS 1419 F (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI T. BANUSEKAR DEPARTMENT BY : SHRI ANIRUDH RAI O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II AT CHENNAI DATED 16.09.2010 PASSED U/S 271(1)(C) OF THE INCOME- TAX ACT, 1961 WHEREBY PENALTY OF ` 1,67,37,400/- WAS LEVIED. IN ITA NO. 2142/MDS/2010 :- 2 -: THIS ORDER WHEREVER ANY SECTION IS MENTIONED, IT WO ULD BE OF THE INCOME-TAX ACT, 1961 ONLY UNLESS OTHERWISE SPECIFIC ALLY MENTIONED. 2. BRIEFLY STATED THE FACTS LEADING TO THIS APPEAL ARE THAT A SEARCH U/S 132 WAS CONDUCTED AT THE RESIDENCE OF SH RI SUBHASH CHAND NAHAR, A PARTNER OF THE FIRM M/S SMJ HOUSING, AT NO. 6/1, NAHAR DRIVE, MAHARANI CHINNAMMA ROAD, ALWARPET, CHE NNAI-18 ON 26.10.2005. THE ASSESSEE FIRM FILED ITS RETURN OF INCOME [ROI] ON 30.08.2006 SHOWING BUSINESS INCOME OF ` . 4,57,39,980/. DURING SEARCH, INCRIMINATING MATERIAL/DOCUMENTS REL ATING TO M/S SMJ HOUSING WERE FOUND AND SEIZED. ACCORDINGLY, A NOTICE U/S 153A(A) R.W.S 153C OF THE ACT WAS ISSUED TO THE FIR M ON 15.10.2007. THIS NOTICE WAS COMPLIED WITH BY FILIN G RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 ON 19.12.2007 DE CLARING SAME TOTAL INCOME OF ` . 4,57,39,980/-. ASSESSMENT U/S 143(3) R.W.S. 153C WAS COMPLETED ON 31.12.2007 AT A TOTAL INCOME OF ` . 4,57,39,982/-. PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT WAS INITIATED AGAINST THE FIRM BY ISSUANCE OF NOTICE U/ S 274. BEFORE THE ASSESSING OFFICER, DURING PENALTY PROCEEDINGS, IT WAS CONTENDED THROUGH WRITTEN SUBMISSIONS DATED 18.6.20 08 THAT NO ITA NO. 2142/MDS/2010 :- 3 -: PENALTY U/S 271(1)(C) CAN BE LEVIED IN VIEW OF EXPL ANATION 3 TO THIS SECTION. EXPLANATION 3 STATES THAT IF A PERSO N DOES NOT FILE A ROI, WITHOUT A REASONABLE CAUSE, FOR AN ASSESSMENT YEAR VOLUNTARILY WITHIN 2 YEARS FROM THE END OF THE ASSE SSMENT YEAR IN WHICH THE INCOME WAS FIRST ASSESSABLE AND NO NOT ICE U/S 142(1) OR 148 IS ISSUED TILL THEN HE IS TREATED TO HAVE CONCEALED INCOME. SINCE THE ROI WAS FILED ON 30.8.2006, WELL WITHIN PRESCRIBED LIMIT, NO PENALTY IS EXIGIBLE. IT WAS FU RTHER EXPLAINED THAT SHRI SUBHASH CHAND NAHAR, THE PARTNER OF THE A SSESSEE FIRM AND HIS PREMISES, WERE SUBJECTED TO SEARCH DURING W HICH CERTAIN DOCUMENTS AND MATERIAL RELATING TO THE FIRM WHICH W AS MAINTAINING REGULAR BOOKS OF ACCOUNT AT ITS OFFICE WERE FOUND TO BE SEIZED. THE ASSESSEE FURNISHED COPIES OF BALANCE SHEET, PROFIT AND LOSS ACCOUNT AND, ALSO BOOKS OF ACCOUNT OF THE FIRM TO THE DDIT WHICH WERE RETAINED BY HIM. ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS OF REAL ESTATE. DURING THE RELEVANT YEAR IT DEALT IN ONLY ONE PROPERTY SITUATED AT PERUNGUDI , OLD MAHABALIPURAM ROAD, CHENNAI. FURTHER CASE OF THE ASSESSEE WAS THAT DUE DATE FOR FILING ROI FOR THE YEAR UNDER CONSIDERATION WAS 31.10.2005, WHICH HAD NOT EXPIRED. BUT THE ASS ESSING ITA NO. 2142/MDS/2010 :- 4 -: OFFICER WAS NOT SATISFIED ABOUT THE FACT AS TO WHY ROI WAS NOT FILED WHEN THE FIRM FORMED ON 16.12.2003 WAS DISSOL VED ON 31.3.2005 BY A DEED OF DISSOLUTION EXECUTED ON 17,2 ,2006 AND THERE WAS NO TRANSACTION IN THE F.Y. 2005-06. DURIN G SEARCH, IT WAS ALSO FOUND THAT THIS FIRM HAD SOLD IMMOVABLE PR OPERTY SITUATED AT OLD MAHABALIPURAM AND HAD EARNED HUGE P ROFIT. DURING SEARCH, NO BOOKS OF ACCOUNT PERTAINING TO TH E FIRM WERE FOUND AND ROI OF THE FIRM HAD NOT BEEN FILED TILL T HE DATE OF SEARCH. IT WAS ONLY DURING POST SEARCH ENQUIRY THA T BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE DDIT [INV] SHOWING NET PROFIT OF ` . 4,57,39,980/- AND ALSO ROI WAS FILED ON 30.8.2006. AS PER THE ASSESSING OFFICER ROI WAS FILED CONSEQUENT UPON THE SEARCH PROCEEDINGS BUT FOR WHICH NO ROI WOULD HAVE BEEN FIL ED. THUS, IN THE TOTALITY OF THE FACTS AND THE CIRCUMSTANCES OF THE CASE, HE HAS CONCLUDED THAT THE ASSESSEE HAS CONCEALED HIS I NCOME FOR ASSESSMENT YEAR 2005-06 AND ACCORDINGLY HE HAS LEVI ED A MINIMUM PENALTY OF ` 1,67,37,402/- U/S 271(1)(C). 3. AGAINST THIS PENALTY ORDER DATED 27.6.2008, ASSE SSEE-FIRM PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A), WHO H AS DELETED THE ITA NO. 2142/MDS/2010 :- 5 -: ENTIRE PENALTY BY ACCEPTING IT ON THE BASIS OF THE FOLLOWING REASONING: 1. THERE WAS SEARCH CONDUCTED IN THE APPELLANTS CA SE ON 26.10.2005 [SICK PARTNERS CASE] 2. THE DUE DATE FOR FILING OF RETURN FOR THE ASSESS MENT YEAR 2005-06 FALLS ON 31.10.2005 3 THE APPELLANT FIRM FILED ITS RETURN OF INCOME ON 30.8.2006 AND PAID THE TAXES ON THE RETURNED INCOME WELL BEFORE FILING THE RETURN. 4. THE LD. A.R. OF THE APPELLANT SUBMITTED THAT THE COMPUTER AND OTHER MATERIALS WERE SEIZED AND KEPT UNDER THE CUSTODY OF THE DEPARTMENT. 5. THE APPELLANT HAS TO GET ITS BOOKS OF ACCOUNTS AUDITED U/S 44AB AS THE TURNOVER EXCEEDED ` 40 LAKHS 6. THE ASSESSING OFFICER HAS ACCEPTED AND ASSESSED THE RETURNED INCOME WITHOUT MAKING ANY FURTHER ADDITION. 7. THE APPELLANT HAS PAID THE INTEREST PART FOR THE DELAY IN FILLING THE RETURN AS WELL AS PAID THE TAXES WHE REBY NO LOSS OF REVENUE. ITA NO. 2142/MDS/2010 :- 6 -: 8. THE LD. A.R. OF THE APPELLANT SUBMITTED THAT THE ENTIRE FAMILY WAS DISTURBED DUE TO THE SEARCH AND THEREBY IT TOOK SOMETIME TO RETURN TO NORMALCY. 4. NOW THE REVENUE IS IN APPEAL AND HAS RAISED THE F OLLOWING GROUNDS. 1(A).ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT AMOUNTING TO RS. 1,67,37,400/-. 1(B) THE LD. CIT(A) HAS FAILED TO NOTE THAT AS ON D ATE OF SEARCH ON 26.10.2005, NO ADVANCE TAX RELATING TO TH E RETURNED INCOME HAS BEEN PAID BY THE FIRM, NO BOOKS OF ACCOUNTS PERTAINING TO THE FIRM WERE FOUND, NO RETURN OF INCOME HAS BEEN FILED AND THAT BOOKS OF ACCOUNT WERE FILED BEFORE THE DDIT(INV) ONLY DURING THE POST SEARCH INVESTIGATION WHICH FACT CLEARLY PROVES THAT HE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND THAT SUCH INCOME WAS NEITHER REFLECTED IN THE BOOKS NOR INTIMATED TO THE CCIT OR CIT AS REQUIRED UNDER EXPLANATION 5 TO SECTION 271(1)(C). ITA NO. 2142/MDS/2010 :- 7 -: 1(C) THE LD. CIT(A) HAS FAILED TO NOTE THAT THE RET URN OF INCOME FILED BY THE ASSESSEE ON 30.8.2006 WAS ONLY CONSEQUENTIAL TO THE SEARCH ON 26.10.2005, THE ASSESSEE HAS NOT PAID ADVANCE TAX RELATABLE TO THE INCOME, THE DEPARTMENT HAD TO RESORT TO SEARCH ACTION IN THE CASE OF PARTNER, SEIZE THE CASH AND ADJUST IT AGAINST THE SELF ASSESSMENT TAX OF THE FI RM, AND A SUM OF RS. 67,37,403/- STILL REMAINED PAYABLE U/S 140A AND HENCE THE INCOME ADMITTED IN THE RETURN OF INCOME FILED ON 30.8.2006 CANNOT BE CONSIDERED AS DECLARED OR ADMITTED BUT ONLY AS CONCEALED INCOME. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AV AILABLE ON RECORD. THE LEGISLATURE, IN ITS WISDOM, HAS ENACTED A PROVISION FOR LEVY OF PENALTY IN THE CASE OF THE ASSESSEE CON CEALS TAXABLE INCOME OR/AND FURNISHES INACCURATE PARTICULARS OF I NCOME AS POSTULATED IN SECTION 271(1)(C) OF THE ACT. THIS S ECTION READS AS UNDER: IF THE ASSESSING OFFICER OR THE LD. CIT(A) IN THE C OURSE OF ANY PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT AN Y PERSON A. . B. .. ITA NO. 2142/MDS/2010 :- 8 -: C. HAS CONCEALED THE PARTICULARS OF THE INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 6. FROM THE PLAIN READING OF THE ABOVE, IT BECOMES CLEAR THAT CONCEALMENT OF INCOME AND FURNISHING OF INACCURA TE PARTICULARS OF INCOME ARE TWO DIFFERENT DEFAULTS W HICH CAN BE COMMITTED BY ANY ASSESSEE, EITHER SEPARATELY OR EVE N JOINTLY SOMETIMES. HOWEVER, BOTH REFER TO DELIBERATE ACT O N THE PART OF THE ASSESSEE TO DO SO. BUT A MERE OMISSION OR N EGLIGENCE ON THE PART OF THE ASSESSEE WOULD NOT CONSTITUTE A DEL IBERATE SUPPRESSIO VERI OR SUGGESTION FALSO. THE LEVY OF P ENALTY MAY DRAW STRENGTH FROM THE ADDITIONS MADE/CONFIRMED, QU A WHICH PENALTY IN QUESTION IS BEING PROPOSED, OR IT MAY NO T SUPPORT THE LEVY OF PENALTY, YET IT IS A FACT THAT BOTH THESE P ROCEEDINGS OPERATE IN AN ENTIRELY DIFFERENT AND SEPARATE SPHER ES. BY THE REASON OF SIMPLE CONCEALMENT OR OF FURNISHING OF IN ACCURATE PARTICULARS ALONE, ASSESSEE DOES NOT IPSO FACTO BEC OME LIABLE TO PENALTY, MEANING THEREBY IMPOSING OF PENALTY IS NOT AUTOMATIC AND THE ASSESSEE IS ALWAYS AT LIBERTY TO REBUT THE SAME. NOT ONLY IS LEVY OF PENALTY IS DISCRETIONARY BUT THIS D ISCRETION IS ITA NO. 2142/MDS/2010 :- 9 -: REQUIRED TO BE EXERCISED KEEPING IN MIND THE RELEVA NT FACTORS AND THE APPROACH OF THE AUTHORITY SHOULD BE FAIR AN D OBJECTIVE. EXCEPT, AS PRESCRIBED IN EXPLANATION (5) APPENDED T O THIS SECTION, AS EXTRACTED HEREINABOVE, THE ONUS LIES ON THE REVENUE TO ESTABLISH EITHER OF THE TWO AFOREMENTIONED CONDI TIONS FOR LEVYING PENALTY ON THE ASSESSEE. 7. EXPLANATION 5 OF SECTION 271(1)(C) OF THE ACT I S RELEVANT FOR PRESENT CONSIDERATION BECAUSE IN THIS CASE SEAR CH TOOK PLACE U/S 132 OF THE ACT BEFORE THE FIRST DAY OF JU NE 2007 AND ASSESSEE WAS FOUND TO BE OWNER OF MONEY [INCOME] WH ICH THE ASSESSEE CLAIMS THAT WAS EARNED DURING THE PREVIOUS YEAR. THE UNDISPUTED FACTS OF THIS CASE ARE THAT UPTO THE DATE OF SEARCH I.E. 26.10.2005 THE ASSESSEE HAD NOT PAID AN Y ADVANCE TAX RELATING TO THE INCOME IN QUESTION; NO BOOKS OF ACCOUNT PERTAINING THE FIRM WERE FOUND; NO RETURN OF INCOME HAD BEEN FILED AND BOOKS OF ACCOUNT WERE FILED BEFORE T HE DDIT ONLY DURING POST SEARCH INVESTIGATIONS. THE INCOME WHICH WAS OFFERED, POST SEARCH WAS NEITHER REFLECTED IN THE B OOKS NOR INTIMATED TO THE LD. CIT OR LD. CCIT AS REQUIRED IN EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT. THE ENTIRE CIRC UMSTANCES OF ITA NO. 2142/MDS/2010 :- 10 - : THIS CASE GO TO SUGGEST ONLY ONE PRESUMPTION THAT B UT FOR THIS SEARCH, THE ASSESSEE WOULD HAVE NEVER HAVE REVEALED THIS INCOME TO THE DEPARTMENT. EVEN AFTER SEARCH, THE R ETURN OF INCOME WAS FILED BY THE ASSESSEE ON 30.8.2006. THE ASSESSEE HAS NOT PAID ADVANCE TAX RELATABLE TO THIS INCOME A ND THIS FACTUM IS VERY RELEVANT FOR THE DECISION OF THE PEN ALTY APPEAL. THE DEPARTMENT HAS RESORTED TO SEARCH IN THE CASE O F PARTNERS AND SEIZED THE CASH AND ASSESSED IT AGAINS T FIRST ASSESSMENT TAX OF THE FIRM AND A SUM OF ` `` ` 67,37,403/- STILL REMAINED PAYABLE U/S 40A OF THE ACT. SO, IN OUR CO NSIDERED OPINION, THE RETURNED INCOME CANNOT BE CONSIDERED A S VOLUNTARY DECLARATION OR ADMISSION BUT IT IS A CONC EALED ACT OF THE ASSESSEE WHICH CAME TO FORTH ONLY AND ONLY AS A RESULT OF THE SEARCH CARRIED IN THE CASE OF THE PARTNER. THE LAST DATE FOR FILING OF ROI FOR THIS ASSESSMENT YEAR WAS 31.1 0.2005. THE FIRM WAS FORMED ON 16.12.2003, AND FOR ALL PRAC TICAL PURPOSES WAS DISSOLVED ON 31.3.2005 BY A DEED OF DI SSOLUTION EXECUTED ON 17.2.2006. SO, THERE WAS NO TRANSACTIO N IN THE F.Y. 2005-06. DURING SEARCH, IT WAS FOUND THAT THE FIRM HAD SOLD IMMOVABLE PROPERTY AND EARNED HUGE INCOME DURING THE ITA NO. 2142/MDS/2010 :- 11 - : F.Y ENDING 31.5.2005. IT IS CLEAR CUT CASE OF CONC EALMENT OF INCOME BECAUSE HAD THERE BEEN NO SEARCH IN THE CASE OF PARTNER, NET PROFIT OF ` 4,57,39,892/- WOULD HAVE GONE UNTAXED. IF ANY ASSESSEE IS CAUGHT NAPPING AND THEREAFTER HE DEPOSITS TAX AND COMES FORWARD TO CLAIM THAT LOOK, I HAVE PAID T AX SO I AM NOT EXIGIBLE TO ANY PENALTY, IF THIS IS SO, IT WOUL D DEFEAT THE VERY PURPOSE OF SECTION 271(1)(C). IT IS NOT THE INTENT ION OF THE LEGISLATURE. WHEN ONE OF THE DEFAULTS MENTIONED IN SECTION 271(1)(C) IS COMMITTED, IT IS ONLY A REASONABLE CA USE/EXCUSE WHICH CAN BE SHOWN AS REQUIRED U/S 273B OF THE ACT AND ONLY THEN THE ASSESSEE CAN COME OUT OF THE GUILLOTINE OF THE RIGORS OF SECTION 271(1)(C) OF THE ACT. BUT IN THIS CASE, TH E ASSESSEE HAS NOT EVEN PLEADED FOR ANY SUCH SUFFICIENT CAUSE. THE ONLY REASON GIVEN IS THAT THE DATE OF FILING OF THE RETU RN WAS NOT OVER, SO NO PENALTY CAN BE LEVIED. BUT THIS FACT IS NOT C ORRECT. THE LAST DATE FOR FILING OF THE RETURN WAS 31.10.2005 A ND TILL THEN NO RETURN WAS FILED BY THE ASSESSEE. IT IS ONLY CONSE QUENT TO SEARCH ACTION THAT ASSESSEE HAS COME FORWARD WITH BOOKS AN D FILED RETURN OF INCOME. THE REVENUE IS NOT BOUND TO PROV E THE MENS REA IN SUCH CASES AS PER THE DICTUM OF HON'BLE SUPREME COURT. IT ITA NO. 2142/MDS/2010 :- 12 - : IS ENOUGH IF IT IS SHOWN THAT EITHER THE ASSESSEE H AS CONCEALED INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. IN THIS CASE, ASSESSEE HAS CONCEALED THE TAXABLE INCOM E AND THIS IS A CLEAR CUT CASE OF CONCEALMENT OF INCOME. IF IN SUCH CASES EMPATHY OR SYMPATHY IS SHOWN, THE PROVISIONS OF SEC TION 271(1)(C) WOULD BECOME REDUNDANT AND OTIOSE. ASSESS EE HAS FURNISHED RETURN OF INCOME ONLY WHEN IT WAS CORNERE D BY THE DEPARTMENT BY THE SEARCH ACTION CARRIED IN THE PART NERS CASE. THE PAYMENT OF TAX ON RETURNED INCOME THAT TOO AS A RESULT OF SEARCH ACTION, DOES NOT ABSOLVE ASSESSEE FROM THE P ROVISIONS OF THIS SECTION. THE ACCEPTANCE OF RETURNED INCOME WI THOUT MAKING FURTHER ENQUIRY IS RELEVANT FOR QUANTUM ADDI TIONS AND THIS FACT ALSO WILL NOT HELP THE ASSESSEE TO ESCAPE FROM THE PENALTY. THE RETURNED INCOME WAS CONCEALED AND THE ACT OF ACCEPTING THE RETURNED INCOME WOULD RATHER CEMENT T HE DEFAULT COMMITTED BY THE ASSESSEE AND THERE BEING NO LOSS T O THE REVENUE ARE NOT RELEVANT CONSIDERATIONS FOR PENALTY PROCEEDINGS. THE QUANTUM PROCEEDINGS ARE DIFFERENT AND THE CONSI DERATIONS FOR THEM ARE ENTIRELY DIFFERENT. IN FACT, PENALTY IS LEVIED BESIDES THE QUANTUM ADDITIONS. WE ARE OF THE CONSI DERED ITA NO. 2142/MDS/2010 :- 13 - : OPINION THAT THE FIRM HAS DEFINITELY CONCEALED ITS TAXABLE INCOME AND IS EXIGIBLE TO PENALTY. SINCE THE ASSESSING OFF ICER HAS LEVIED A MINIMUM PENALTY, WE UPHOLD THE SAME AND SET ASIDE THE FINDING OF THE LD. CIT(A). LEVY OF PENALTY BY THE ASSESSING OFFICER IS CONFIRMED. 8. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE COURT ON 2 ND JUNE 2011. SD/- SD/- ( DR.O.K.NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER CHENNAI : 2 ND JUNE, 2011 VL. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR