V.Anburaj, CHENNAI V. DCIT, CHENNAI

ITA 546/CHNY/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9322 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 12-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: G BASKAR
• Keywords: Reasonable cause
• Section: 143(3); 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . ! , '!# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 546/MDS/2013 ' $ %$ / ASSESSMENT YEAR : 2008-2009 SHRI. V. ANBURAJ, NO.31, KASTURBA NAGAR, FIRST MAIN ROAD, ADYAR, CHENNAI 600 020. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE III, CHENNAI. [PAN AAAPA 6766H] ( / APPELLANT) ( /RESPONDENT) &' ( ) / APPELLANT BY : SHRI. G. BASKAR, ADVOCATE *+&' ( ) /RESPONDENT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. ( , / DATE OF HEARING : 12-04-2016 -.% ( , / DATE OF PRONOUNCEMENT : 19-05-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, C HENNAI IN ITA NO.21/11-12(A)-VIII, DATED 14.12.2012 FOR THE ASSES SMENT YEAR 2008- ITA NO.546/MDS/2013. :- 2 -: 2009 PASSED U/S.271(1)(C) AND 250 OF THE INCOME TA X ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 2. THE APPELLANT HAD UNDERTAKEN PROFESSIONAL DUTIES FOR HSBC BANK IN THE NAME OF MIS KEVIN LOGISTICS. SINCE THERE WAS AN UNDERSTANDING THAT THE TAX WOULD BE BORNE BY THE EMPLOYER, THE BANK THE TAX THAT WAS DEDUCTED WAS REIMBURSED. THE APPELLANT WAS UNDER THE WRONG IMPRESSION THAT SINCE TAX WAS BORNE BY BANK, IT WAS NOT LIABLE TO TAX. ALL THE FACTS WERE AVAILABLE ON RECORDS. THE OMISSION SHOULD HAVE THEREFORE BEEN ACCEPTED AS BONA FIDE. 3. THE APPELLANT HAD OMITTED TO DISCLOSE IN THE RETURN @41,42,995 DESCRIBED AS TDS REIMBURSEMENT ON THE WRONG UNDERSTANDING THAT SINCE IT WAS BORNE BY THE BANK FROM WHOM THE AMOUNT WAS RECEIVED FOR PROFESSIONAL SERVICES, IT WOULD NOT BE LIABLE TO TAX. THE EXPLANATION FOR THE OMISSION UNDER THE CIRCUMSTANCES SHOULD HAVE BEEN ACCEPTED WHEN THE PARTICULARS INCLUDING THE AMOUNTS RECEIVED AND TAX DEDUCTION CERTIFICATES WERE. FILED. THE EXPLANATION HAD NOT BEEN FOUND TO BE FALSE, SO THAT PENALTY, IT IS SUBMITTED, IS NOT EXIGIBLE IN THE LIGHT OF EXPLANATION TO SECTION 271(1) (C). THE COMMISSIONER (APPEALS) HAD, THEREFORE, ERRED IN UPHOLDING THE PENALTY. 4. THE ADDITION OF @4 LAKHS ADDED AS AMOUNT CONTRIBUTED AS CAPITAL DURING THE YEAR IN THE BOOKS OF SURYA TRADING OF WHICH THE APPELLANT IS A PARTNER, THE APPELLANT HAS GIVEN EXPLANATION BUT WAS WRONGLY PERSUADED TO OFFER @4LAKHS OUT OF RS.8,76,246 ON AN AD HOC BASIS WITH A VIEW TO PURCHASE PEACE AND AVOID PENALTY, THOUGH APPELLANT'S RECORDS WOULD CLEARLY INDICATE THAT THE AMOUNT WAS WITHIN HIS ACCOUNTED RESOURCES. IN RESPECT OF THIS ADDITION ALSO EXPLANATION WERE FURNISHED WITH SUCH ITA NO.546/MDS/2013. :- 3 -: EXPLANATION NOT FOUND TO BE FALSE, PENALTY, IT IS SUBMITTED IS, THEREFORE, NOT EXIGIBLE. 5. NEITHER THE LEARNED ASSESSING OFFICER NOR THE LEARNED COMMISSIONER HAVE APPLIED THEIR MIND TO THE FACTS IN THE LIGHT OF THE LAW. APPELLANT HAS, THEREFORE, AFFIRMED THE FACTS IN AN AFFIDAVIT, WHICH IS ENCLOSED HEREWITH WITH A REQUEST TO CONSIDER THE SAME AS PART AND PARCEL OF THE APPEAL. 3. THE BRIEF FACTS OF THE CASE THE ASSESSEE IS AN INDI VIDUAL AND PROPRIETOR OF M/S. KEVIN LOGISTICS AND PROVIDES BUS INESS SUPPORT SERVICES TO HSBC BANK. FOR THE ASSESSMENT YEAR 200 8-09 THE ASSESSEE FILED RETURN OF INCOME ON 23.08.2008 WITH TOTAL INC OME OF @15,04,912/-. SUBSEQUENTLY AS PER CASS NORMS, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) AND 142(1) OF TH E ACT WAS ISSUED. IN COMPLIANCE TO NOTICES, THE LD. AUTHORISED REPRES ENTATIVE OF ASSESSEE APPEARED AND EXPLAINED THAT ASSESSEE IS PROVIDING B USINESS SUPPORT SERVICE TO HSBC AND RECEIVE SERVICE CHARGES AND SAM E WAS OFFERED IN PROFIT AND LOSS. DURING THE ASSESSMENT PROCEEDINGS , THE LD. ASSESSING OFFICER FOUND A DIFFERENCE IN GROSS INCOME OFFERED IN PROFIT AND LOSS ACCOUNT AND TDS CERTIFICATES AND ASSESSEE FILED CLA RIFICATION THROUGH LETTER DATED 22.10.2010 AND EXPLAINED AS UNDER:- WHILE FILING THE RETURN CLAIM OF SERVICE TAX AND TDS REIMBURSED ARE NOT OFFERED AS INCOME. SERVICE TAX CLAIMED IS REMITTED TO DEPARTMENT PERIODICALLY. TDS REIMBU RSEMENT HAS NOT BEEN OFFERED TO INCOME TAX ERRONEOUSLY, SIN CE I WAS ITA NO.546/MDS/2013. :- 4 -: UNDER THE IMPRESSION AND FIRM BELIEF THAT IT IS NOT SUBJECT TO TAX AND IT IS NOT A PART OF INCOME. NOW I AM ADVISED THAT TDS REIMBURSED SHOULD ALSO FO RMING PART OF INCOME. 1. GROSS INCOME AS PER FORM 16A @6.57 CRORES. 2. INCOME AS PER PROFIT AND LOSS AC. @5.54 CRORES. -------------------- 3.DIFFERENCE @.1.03 CRORES DIFFERENCE IS REPRESENTED (A) SERVICE TAX @0.62 CRORES (B) TDS REIMBURSEMENT @0.41 CRORES. ----------------------- @1.03 CRORES ---------------------- HENCE, I WOULD LIKE TO OFFER THIS TDS REIMBURSEMENT AS INCOME. I WOULD LIKE TO SUBMIT THAT I HAVE NOT CONC EALED ANY INCOME AND REQUEST YOU NOT TO INITIATE PENAL PROCEE DINGS. THE ACTUAL DIFFERENCE BEING TDS REIMBURSEMENT OF @4 1,42,995/- AND THE ASSESSEE HAS OFFERED INCOME IN REVISED COMPUTAT ION OF INCOME BEFORE ASSESSING OFFICER. THE LD. ASSESSING OFFICE R MADE ADDITION OF @4,00,000/- AS THE ASSESSEE IS A PARTNER IN M/S. S URYA TRADING AND ASSESSEE COULD NOT SUBSTANTIATE WITH PROPER SOURCE TO THE EXTENT OF INTRODUCTION OF CAPITAL IN PARTNERSHIP FIRM AND PAS SED ORDER U/S.143(3) OF THE ACT DATED 31.12.2010. SUBSEQUENTLY, THE ASS ESSING OFFICER INITIATED PENALTY PROCEEDINGS AND IN COMPLIANCE, TH E LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FILED E XPLANATIONS. IN THE PENALTY PROCEEDINGS, THE ASSESSEE SUBMITTED EXH AUSTIVE EXPLANATIONS AND CLARIFICATIONS ON THE ADDITION. TH E LD. ASSESSING OFFICER IS OF THE OPINION THAT ASSESSEE FAILED TO E XPLAIN THE GENUINENESS ITA NO.546/MDS/2013. :- 5 -: OF TDS REIMBURSEMENTS AND THE REASONS FOR NOT INCLU DING THE SAME AS INCOME FOR THE ASSESSMENT YEAR AND FURTHER ASSESSEE COULD NOT PROVE FULLY WITH SOURCES FOR INTRODUCTION OF CAPITAL. W ITH THESE OBSERVATIONS, THE LD. ASSESSING OFFICER LEVIED PENALTY OF @15,55, 935/-. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE COMM ISSIONER OF INCOME TAX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE SUBSTANTIATED HIS ARGUMENTS AND EXPL AINED THE REASONS THAT THE ASSESSEE COULD NOT OFFER SUCH INCOME AT T HE TIME OF FILING OF RETURN AND THE SAME WAS DISCLOSED IN THE ASSESSMEN T PROCEEDINGS. THE ASSESSEE HAS NEITHER CONCELED INCOME OR FURNIS HED INACCURATE PARTICULARS AND THE ADDITIONS ARE MADE PRIMA FACIE BASED ON THE MATERIAL DOCUMENTS FURNISHED BY THE ASSESSEE. THE P ENALTY PROCEEDINGS ARE INITIATED TREATING THE ADDITION AS CONCELED INCOME AND ASSESSEE HAS SUBMITTED ALL DOCUMENTS AND RECORDS IN THE ASSESSMENT PROCEEDINGS AND SAME WERE CONSIDERED FOR LEVY OF PE NALTY. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE SUBMISSIONS, GROUNDS AND EXPRESSED OPINION ON THE ADDITIONS ELA BORATELY IN HIS ORDER AND CAME TO A FINAL CONCLUSION THAT CLARIFICA TIONS FURNISHED BY THE ASSESSEE CANNOT BE CONSIDERED AS THERE IS NO EX CUSE ON IGNORANCE OF PROVISION OF LAW AND FURTHER ON INTRODUCTION OF FRESH CAPITAL IN THE ITA NO.546/MDS/2013. :- 6 -: PARTNERSHIP FIRM AND THE OFFERING OF INCOME DOES N OT PROVIDE IMMUNITY FROM PENALTY PROCEEDINGS. THE ASSESSEE INABILITY O N EXPLAINING THE SOURCE OF CAPITAL CANNOT BE IGNORED. THE LD. AUTHO RISED REPRESENTATIVE SUBMITTED THAT ASSESSEE HAS VOLUNTARILY OFFERED TDS REIMBURSEMENT AMOUNT FROM HSBC BANK AS INCOME BEFORE DETECTION BY THE REVENUE. THERE IS NO CONCEALMENT OF INCOME BUT RECONCILIATIO N OF AMOUNT BEFORE ASSESSING OFFICER. NON AVAILABILITY OF SOURCE FOR I NTRODUCTION OF FRESH CAPITAL TO THE EXTENT OF @4,00,000/- IN PARTNERSHIP FIRM AND CANNOT BE CONCEALMENT. THE ASSESSEE HAS FAILED TO INCLUDE REI MBURSEMENT OF INCOME IN THE PROFIT AND LOSS ACCOUNT AND CLARIFICA TION ARE NOT CONVINCING AND COULD NOT BE EXPLAINED WITH VALID RE ASONS. FURTHER, THE ASSESSEE COULD NOT ESTABLISH CREDITWORTHINESS OF FR ESH CAPITAL INTRODUCED IN THE FIRM. THE ASSESSEE HAS NOT PREFER RED AN APPEAL AGAINST ORDER U/SEC. 143(3) OF THE ACT DATED 31.12. 2010 AND WHICH IS NOT A VALID REASONABLE CAUSE IN PENALTY PROCEEDINGS AND LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS UPHELD THE ORDER OF ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS), THE ASSESSEE HAS ASSAILED AN APPEAL BEFORE TRIBUNAL. 5. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE HAS RE ITERATED THE SUBMISSIONS WITH DOCUMENTARY EVIDENCE OF THE A SSESSMENT PROCEEDINGS, PENALTY AND APPELLATE PROCEEDINGS. B EFORE ASSESSING ITA NO.546/MDS/2013. :- 7 -: OFFICER THE ASSESSEE HAS OFFERED INCOME IN RESPECT OF REIMBURSEMENT OF TDS BY THE BANK WERE THE ASSESSEE WAS UNDER BON AFIDE IMPRESSION THAT THE INCOME TAX HAS BEEN PAID BY THE BANK AND O N THE SECOND ADDITION OF INTRODUCTION OF CASH IN PARTNERSHIP FI RM DUE TO BUSY SCHEDULE THE ASSESSEE COULD NOT RECOLLECT THE SOURC ES AND TO BUY PEACE WITH THE DEPARTMENT ACCEPTED ADDITION AND NO T CONTESTED THE QUANTUM APPEAL BEFORE COMMISSIONER OF INCOME TAX (A PPEALS). THE ASSESSEE ALSO FILED AN AFFIDAVIT ON THE ADDITIONS A ND PRAYED FOR DELETION OF PENALTY AS THERE WAS A VOLUNTARY ADMISSION OF T HE INCOME AND PRAYED FOR SET ASIDE OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 6. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF LOWER AUTHORITIES AND OPPOSED TO THE GROU NDS OF APPEAL. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERI AL, DOCUMENTARY EVIDENCE AND AFFIDAVIT FILED BY THE AS SESSEE. THE ONLY CONTENTION WHICH LD. AUTHORISED REPRESENTATIVE HAS EXPRESSED REPEATEDLY ON UNDERSTANDING WITH THE BANK THAT TAX WILL BE BORNE BY BANK AND REIMBURSED. FURTHER, THE ASSESSEE HAS VOL UNTARILY FILED REVISED STATEMENTS AND HAS OFFERED REIMBURSEMENT AM OUNT IN ASSESSMENT PROCEEDINGS AND CALCULATIONS ARE BASED ON THE DOCUMENTS I.E FORM NO.16A AND BOOKS OF ACCOUNT. ON INTRODUC TION OF FRESH ITA NO.546/MDS/2013. :- 8 -: CAPITAL AS PARTNER IN PARTNERSHIP COULD NOT BE EST ABLISHED WITH ANY ACCOUNTED SOURCE AND IS DISBELIEVED. WE HAVE PERU SED THE AFFIDAVIT OF THE ASSESSEE ON THE ISSUE OF REIMBURSEMENT OF TDS O F @41,42,995/- AS PER THE UNDERSTANDING OF THE BANK, THE ASSESSEE IS REGULARLY RENDERING SERVICE TO THE BANK. PRIME FACIE THE ASSESSEE ACCE PTED THE PAYMENTS NET OF TAXES AND INCLUDED IN PROFIT AND LOSS ACCOUN T ONLY THE AMOUNTS WHICH ARE RECEIVED. THE DISCREPANCIES IN AMOUNT DUE TO TDS AND THE PROFIT AND LOSS ACCOUNT WERE THE AUDITOR HAS ADVISE D THE ASSESSEE TO ACCEPT THE INCOME AND THE SAME WAS BROUGHT ON REC ORD. THE ASSESSEE STATEMENT SEEMS TO BE REASONABLE AS GROSS RECEIPT OFFERED @5.54 CRORES IN PROFIT AND LOSS ACCOUNT. IF THERE WAS CLARITY ON TAXES THE ASSESSEE COULD HAVE DEFINITELY INCLUDED IN THE RETURN OF INCOME AS AFFIRMED BY THE ASSESSEE IN THE AFFIDAVIT. WE FIND ON THIS GROUND THERE IS A REASONABLE CAUSE AND OTHER GROUND OF INTRODUCT ION OF CAPITAL THE ASSESSEE HAS INTRODUCED CASH IN THE FIRMS BOOKS AS CAPITAL INTRODUCTION WHICH ASSESSEE COULD NOT GIVE SATISFACTORY EXPLANAT ION. THE EXPLANATION GIVEN BY THE ASSESSEE IS THAT HE HAS AC CEPTED THE ADDITION ONLY TO PURCHASE PEACE. THIS EXPLANATION IS VERY CO MMON IN NATURE AND CANNOT BE SAID THAT IT IS A BONAFIDE. WE ALSO PLACE RELIANCE ON THE JUDGMENT OF SUPREME COURT IN THE CASE OF MAK DATA (PVT) LTD. VS. CIT 358 ITR 593 , WHEREIN IT WAS HELD THAT :- ITA NO.546/MDS/2013. :- 9 -: THE ASSESSEE HAD ONLY STATED THAT IT HAD SURREND ERED THE ADDITIONAL SUM OF 40,74,000 TO AVOID LITIGATION, BUY PEACE AND TO CHANNELIZE THE ENERGY AND RESOURCES TOWARDS PROD UCTIVE WORK AND TO MAKE AMICABLE SETTLEMENT WITH THE INCOME-TAX DEPARTMENT. THE STATUTE DID NOT RECOGNIZE THOSE TYPES OF DEFENC ES UNDER EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. THE SURRENDER OF INCOME IN THIS CASE WAS NOT VOLUNTARY IN THE SENSE THAT THE OFFER OF SURRENDER WAS MADE IN VIEW OF DETECTION BY THE ASSE SSING OFFICER IN THE SEARCH CONDUCTED IN THE SISTER CONCERN OF TH E ASSESSEE. THE SURVEY WAS CONDUCTED MORE THAN 10 MONTHS BEFORE THE ASSESSEE FILED ITS RETURN OF INCOME. HAD IT BEEN THE INTENTI ON OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF ITS INCOME, IT WOULD HAVE FILED THE RETURN DECLARING AN INCOME INCLUSIVE OF THE AMO UNT WHICH WAS SURRENDERED LATER DURING THE COURSE OF THE ASSESSME NT PROCEEDINGS. CONSEQUENTLY, IT WAS CLEAR THAT THE AS SESSEE HAD NO INTENTION TO DECLARE ITS TRUE INCOME. IT IS THE STA TUTORY DUTY OF THE ASSESSEE TO RECORD ALL ITS TRANSACTIONS IN THE BOOK S OF ACCOUNT, TO EXPLAIN THE SOURCE OF PAYMENTS MADE BY IT AND TO DE CLARE ITS TRUE INCOME IN THE RETURN OF INCOME FILED BY IT FROM YEA R TO YEAR. THE ASSESSING OFFICER HAD RECORDED A CATEGORICAL FINDIN G THAT HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEALED THE TRUE PARTICULARS OF INCOME AND WAS LIABLE FOR PENALTY PROCEEDINGS UNDER SECTION 271 READ WITH SECTION 274 OF THE ACT. THERE WAS NO ILLE GALITY IN THE DEPARTMENT INITIATING PENALTY PROCEEDINGS SO, CONSIDERING THE FACTS, WE DIRECT THE ASSESSIN G OFFICER TO LEVY PENALTY ONLY ON THE ADDITION OF CAPITAL INTRODUCTIO N IN FIRM BY THE ASSESSEE AND SET ASIDE THE ORDER OF COMMISSIONER OF INCOME TAX ITA NO.546/MDS/2013. :- 10 -: (APPEALS) AND REMIT THE ISSUE IN DISPUTE TO ASSESSI NG OFFICER TO RECOMPUTE THE PENALTY LEVIABLE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.546/MDS/2013 IS PARTLY ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 19TH DAY OF MA Y, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ) (G. PAVAN KUMAR) / JUDICIAL MEMBER / CHENNAI 0 / DATED:19.05.2016 KV 1 ( *',23 43%, / COPY TO: 1 . &' / APPELLANT 3. 5, () / CIT(A) 5. 389 *',' / DR 2. *+&' / RESPONDENT 4. 5, / CIT 6. 9:$ ; / GF