DCIT, Mohali V. M/s Preet Land Promoters & Developers Pvt. Ltd., Mohali

ITA 582/CHANDI/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0016 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Document seized; Documents seized
• Section: 133A; 27; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NOS.581 & 582/CHD/2012 (ASSESSMENT YEARS : 2006-07 & 2007-08) THE D.C.I.T., VS. M/S PREET LAND PROMOTERS CIRCLE 6(1), & DEVELOPERS PVT. LTD., MOHALI. VILLAGE NANU MAJRA, SITE OFFICE, SECTOR 86, MOHALI. PAN: AADCP8893L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. MITTAL, DR RESPONDENT BY : SHRI VINEET KRISHAN DATE OF HEARING : 22.04.2016 DATE OF PRONOUNCEMENT : 29.04.2016 O R D E R PER RANO JAIN, A.M . : THESE TWO APPEALS APPEAL FILED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), CHANDIGARH, BOTH DATED 23.3.2012, RELATING TO ASSESSMENT YEARS 2006- 07 AND 2007-08, PASSED UNDER SECTION 250(6) OF THE INC OME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN BOTH THE APPEALS, THE ISSUE IS COMMON AND , 2 THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND AR E BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL IN BOTH THE APPEALS, WE MAY REFER TO THE DISCUSSION IN THE ORDERS OF THE INCOME TAX AUTHORITIES IN THE CASE OF ASSESSEE IN ITA NO.581/CHD/2012. 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ORIGINAL RETURN WAS FILED AT NIL INCOME. A SURVEY OPERATION WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE AS ON 6.3.2009 AND DURING THE COURSE OF SU RVEY, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND. THE ASSESSEE AGREED TO SURRENDER AN ADDITIONAL INCOME O F RS.1 CRORE. ON A RETURN FILED IN PURSUANCE OF NOTICE U NDER SECTION 148, THE ASSESSEE ADDED THE SURRENDERED INC OME IN ITS RETURN OF INCOME. THE ASSESSMENT WAS COMPLE TED AT AN INCOME OF RS.1,00,32,548 MAKING ADDITION OF RS.32,548- ON ACCOUNT OF INTEREST ON FDRS. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED. DURING THE PENALTY PROCEEDINGS, IT WAS STATED THAT THE INCOME WAS SURRENDERED WITH A CONDITION NO T TO IMPOSE PENALTY. REJECTING THE CONTENTION OF THE AS SESSEE THE ASSESSING OFFICER IMPOSED PENALTY IN RESPECT OF SURRENDER OF RS.1 CRORE. 5. BEFORE THE LEARNED CIT (APPEALS), IT WAS STATED AGAIN THAT THE INCOME WAS SURRENDERED IN PECULIAR 3 CIRCUMSTANCES WHERE ASSESSEE WAS NOT ABLE TO EXPLAI N CERTAIN DOCUMENTS, THROUGH A LETTER OF SURRENDER, T HE CONTENTS OF WHICH ARE REPRODUCED IN THE ORDER OF TH E CIT (APPEALS) AT PAGE 4, PARA 5. IT WAS ALSO STATED TH AT THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD AN D SINCE THE PROJECT HAD NOT ACHIEVED EVEN A BARE MINI MUM LEVEL SO AS TO ACCOUNT FOR REVENUE, THE REVENUE REC OGNITION WAS DEFERRED. THEREFORE, AT BEST THE AMOUNT SURREND ERED CAN BE CONSIDERED AS AN ADVANCE RECEIVED. RELIANCE WAS PLACED ON A NUMBER OF JUDGMENTS FOR THE PROPOSITION THAT NO PENALTY CAN BE LEVIED ON THE INCOME SURRENDERED BY THE ASSESSEE. THE CIT (APPEALS), AFTER CONSIDERING THE ARGUMENTS OF THE ASSESSEE, ALLOWED THE APPEAL OF TH E ASSESSEE, RELYING ON THE JUDGMENT OF THE HON'BLE PU NJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. RAJESH G ARG & ORS, 313 ITR 256. 6. AGGRIEVED, THE DEPARTMENT HAS COME UP IN APPEAL, RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOW ING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FAC TS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271(L)(C) OF THE INCOME-TAX ACT, 1961 ON CONCEALED INCOM E OF RS. 1,00,00,000/-. 3. IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) B E SET 4 ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OFF. 7. THE LEARNED D.R. RELYING ON THE ORDER OF THE ASSESSING OFFICER STATED THAT JUST BECAUSE THE ASSE SSEE HAS ITSELF SURRENDERED THE INCOME, PENALTY UNDER SE CTION 271(1)(C) OF THE ACT CANNOT BE DELETED. HEAVY RELI ANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF MAK DATA (P) LTD. VS. CIT (2013) 358 I TR 593 (SC) FOR THE PROPOSITION THAT THE SURRENDER MADE BY THE ASSESSEE AFTER BEING CAUGHT BY THE DEPARTMENT, DOES NOT ABSOLVE HIM FROM THE LIABILITY OF PENALTY. 8. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. IT WAS STATED THAT THE AMOUNT SURRENDERED WAS NOT ACTU ALLY THE INCOME OF THE ASSESSEE, AS THE RELEVANT ASSESSM ENT YEAR BEING THE INITIAL PHASE OF THE PROJECT CARRIED ON BY THE ASSESSEE AND THE ASSESSEE FOLLOWING PROJECT COM PLETION METHOD, NO INCOME COULD HAVE BEEN SAID TO HAVE OCCU RRED TO IT. ATTEMPT WAS ALSO MADE TO DISTINGUISH THE FA CTS OF THE CASE OF MAK DATA (P) LTD. (SUPRA) FROM THE FACT S OF THE PRESENT CASE. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. 5 THE UNDISPUTED FACTS ARE THAT BECAUSE OF ITS INABIL ITY TO EXPLAIN CERTAIN DOCUMENTS FOUND DURING THE COURSE O F SURVEY, THE ASSESSEE SURRENDERED AN AMOUNT OF RS.1 CRORE, WHICH WAS DULY ADDED BY IT IN ITS RETURN OF INCOME AFTER MAKING PAYMENT OF DUE TAXES THEREON. THE ASSESSMEN T IS FRAMED AFTER MAKING A MINOR ADDITION ON ACCOUNT OF INTEREST ON FDRS OVER THE RETURNED INCOME. HEAVY RELIANCE WAS PLACED BY THE LEARNED D.R. ON THE JUDG MENT OF HON'BLE SUPREME COURT IN THE CASE OF MAK DATA (P ) LTD. (SUPRA). THEREFORE, WE BEGIN TO ANALYZE THE SAID J UDGMENT VIS--VIS THE FACTS OF THE PRESENT CASE. 10. THE RELEVANT FINDINGS OF THE HON'BLE SUPREME COURT IN THE CASE OF MAK DATA (P) LTD. (SUPRA) ARE AS FOLLOWS : THE AO, IN OUR VIEW, SHALL NOT BE CARRIED AWAY BY THE PLEA OF THE ASSESSEE LIKE 'VOLUNTARY DISCLOSURE', 'BUY PEACE' , 'AVOID LITIGATION', 'AMICABLE SETTLEMENT', ETC. TO EXPLAIN AWAY ITS CONDUCT. THE QUESTION IS WHETHER THE ASSESSEE HAS OFF ERED ANY EXPLANATION FOR CONCEALMENT OF PARTICULARS OF I NCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. 11. THE QUESTION IS WHETHER THE PRESUMPTION UNDER EXPLANATION-1 TO SECTION 271(1)(C) OF THE ACT CAN B E RAISED WHEN THERE IS NO DIFFERENCE BETWEEN THE RETURNED AN D ASSESSED INCOME. IN THE PRESENT CASE, ASSESSEE HAV ING ADDED THE SURRENDERED INCOME IN ITS RETURN FILED IN PURSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT, T HERE REMAINS NO DIFFERENCE BETWEEN THE RETURNED INCOME A ND ASSESSED INCOME (APART FROM A MINOR ADDITION OF 6 RS.32,548/-, THE PENALTY ON WHICH WAS CONFIRMED BY THE CIT (APPEALS), ASSESSEE IS NOT IN APPEAL). FURTHER , IN THE BACKGROUND OF THE FACTS OF MAK DATA (P) LTD. (SUPRA ), THE HON'BLE SUPREME COURT ANALYZED THE LAWS ON PENALTY ON SURRENDERED INCOME IN FOLLOWING TERMS : 9. WE ARE OF THE VIEW THAT THE SURRENDER OF INCOME IN THIS CASE IS NOT VOLUNTARY IN THE SENSE THAT THE OFFER OF SURRENDER WAS MADE IN VIEW OF DETECTION MADE BY THE AO IN THE SEARCH CONDUCTED IN THE SISTER CONCERN OF THE ASSESSEE. IN THAT SITUATION, IT CANNOT BE SAID THAT THE SURRENDER OF INCOME WAS VOLUNTARY. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS NOTICED THAT CERTAIN DOCUMENTS COMPRISING OF SHARE APPLICATION FORMS, BANK STATEMENTS, MEMORANDUM OF ASSOCIATION OF COMPANIES, AFFIDAVITS, COPIES OF INCOME TAX RETURNS AND ASSESSMENT ORDERS AND BLANK SHARE TRANSFER 8 DEEDS DULY SIGNED, HAVE BEEN IMPOUNDED IN THE COURSE OF SURVEY PROCEEDINGS UNDER SECTION 133A CONDUCTED ON 16.12.2003, IN THE CASE OF A SISTER CONCERN OF THE ASSESSEE. THE SURVEY WAS CONDUCTED MORE THAN 10 MONTHS BEFORE THE ASSESSEE FILED ITS RETURN OF INCOM E. HAD IT BEEN THE INTENTION OF THE ASSESSEE TO MAKE FU LL AND TRUE DISCLOSURE OF ITS INCOME, IT WOULD HAVE FILED T HE RETURN DECLARING AN INCOME INCLUSIVE OF THE AMOUNT WHICH WAS SURRENDERED LATER DURING THE COURSE OF TH E ASSESSMENT PROCEEDINGS. CONSEQUENTLY, IT IS CLEAR THAT THE ASSESSEE HAD NO INTENTION TO DECLARE ITS TRUE IN COME. IT IS THE STATUTORY DUTY OF THE ASSESSEE TO RECORD A LL ITS TRANSACTIONS IN THE BOOKS OF ACCOUNT, TO EXPLAIN TH E SOURCE OF PAYMENTS MADE BY IT AND TO DECLARE ITS TRUE INCOME IN THE RETURN OF INCOME FILED BY IT FROM YEAR TO YEAR. THE AO IN OUR VIEW, HAS RECORDED A CATEGORICAL FINDING THAT HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEALED TRUE PARTICULARS OF INCOME AND IS LIABLE FOR 7 PENALTY PROCEEDINGS UNDER SECTION 271 READ WITH SECTION 274 OF THE INCOME TAX ACT, 1961. 12. FROM THE ABOVE, IT IS CLEAR THAT THE INCOME WA S DETECTED IN THAT CASE DURING THE SURVEY PROCEEDINGS ON A THIRD PARTY, BEFORE TEN MONTHS FROM THE DATE ON WHI CH ASSESSEE FILED THE RETURN. THESE FACTS GO TO PROVE THAT EVEN AFTER DETECTION OF INCOME THE ASSESSEE DID NOT ADDED THE SAME IN HIS RETURN OF INCOME. 13. COMING TO THE FACTS OF THE PRESENT CASE, DURIN G SURVEY, ADMITTEDLY, CERTAIN DOCUMENTS WERE FOUND, W HICH WERE NOT EXPLAINABLE BY THE ASSESSEE. HOWEVER, THE RE WAS NEITHER ANY DETECTION BY THE DEPARTMENT ON THE BASI S OF THESE DOCUMENTS, THAT THESE CONTAIN SOME ELEMENT OF INCOME PERTAINING TO THE ASSESSEE. ADMITTEDLY, ALS O THAT THE ASSESSEE MADE SURRENDER, HOWEVER, THE ASSESSEE KEPT ON MAINTAINING THAT THIS IS NOT ITS TOTAL INCOME, A T BEST, THESE ARE THE ADVANCES, AGAINST WHICH IT WILL HAVE TO DELIVER GOODS IN FUTURE. THIS FACT IS VERY CLEARLY EMERGING FROM THE SURRENDER LETTER. THESE CONTENTIONS OF TH E ASSESSEE HAD NOWHERE BEEN REBUTTED BY THE LOWER AUTHORITIES AT ANY STAGE. IN CASE OF MAK DATA (P) LTD. (SUPRA), THE HON'BLE SUPREME COURT DERIVED FROM THE FACTS THAT THE ASSESSEE HAD NO INTENTION TO DECLARE ITS T RUE INCOME. IN THE PRESENT CASE, WITHOUT ANY REBUTTAL BY THE LOWER AUTHORITIES, WE CAN VERY SAFELY INFER THAT WH ATEVER AMOUNT WAS SURRENDERED BY THE ASSESSEE WAS NOT ITS ACTUAL INCOME, BUT JUST AN ESTIMATE. WHY AND HOW T HE 8 ASSESSEE DECIDED TO SURRENDER THE SAME AND PAY ADDITIONAL TAXES ON IT, IS NOT A QUESTION, BEFORE U S, TO GO INTO. 14. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE INCOME WAS SURRENDERED AFTER DETECTION BY THE DEPARTMENT. 15. THERE IS ANOTHER ASPECT TO THE PRESENT CASE. THE ASSESSEE HAD MAINTAINED BEFORE THE LEARNED CIT (APP EALS) THAT IT IS FOLLOWING PROJECT COMPLETION METHOD FOR REVENUE RECOGNITION. ON PERUSAL OF THE COPY OF BALANCE SHE ET FOR THE RELEVANT YEAR, WE SEE THAT THERE ARE NO RESERVE S AND NO PROFITS RECOGNIZED DURING THE YEAR. IN THE NOTES O F ACCOUNTS AND SIGNIFICANT ACCOUNTING POLICIES, IT HA S BEEN MENTIONED SPECIFICALLY, AS FOLLOWS : SALES & OTHER INCOME : THE COMPANY IS IN THE PROCESS OF DEVELOPMENT OF MEGA HOUSING PROJECT. THE SALE WILL COMMENCE ONLY ON COMPLETING OF DEVELOPMENT. 16. IN VIEW OF THE ABOVE ALSO, IT IS QUITE CLEAR T HAT IN FACT, NO INCOME ACCRUED TO THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR. THOUGH IT IS ALSO A MATT ER TO BE DELIBERATED UPON THAT THERE WERE CERTAIN AMOUNTS JO TTED DOWN ON THE SEIZED DOCUMENTS, WHICH WERE NOT EXPLAI NABLE BY THE ASSESSEE. HOWEVER, NONE HAS GONE INTO TO FI ND THE NATURE OF THESE FIGURES, IN VIEW OF THE FACT THAT T HE ASSESSEE ITSELF SURRENDERED CERTAIN AMOUNTS AND PAI D DUE 9 TAXES THEREON. IN THE ABSENCE OF A CATEGORICAL FIN DING BY THE DEPARTMENT THAT THE SURRENDERED AMOUNT WAS IN T HE NATURE OF INCOME, THE PENALTY UNDER SECTION 271(1)( C) OF THE ACT CANNOT BE LEVIED. 17. FOR THIS, WE ARE GUIDED BY THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEX TILES VS. CIT (2001) 249 ITR 125 (GUJ), WHEREBY WHILE EXPLAINING THE SCOPE OF EXPLANATION-1 TO SECTION 27 1(1)(C) OF THE ACT, THE HON'BLE COURT STATED THAT NO PENALT Y CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHESIS T HAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION, WHICH I S UNPROVED BUT NOT DISPROVED, I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POS ITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE, THE EXPLANATION CANNOT HELP THE DEPARTMENT BECAUSE THER E WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT IN QUES TION WAS THE INCOME OF THE ASSESSEE. THIS RATIO HAS ALS O BEEN AFFIRMED BY THE HON'BLE SUPREME COURT IN THE CASE O F MAK DATA (P) LTD. (SUPRA), WHERE IN PARA 7,A T THE END THE COURT STATES AS UNDER : EXPLANATION TO SECTION 271(1) RAISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERENCE IS NOTICED BY THE AO, BETWEEN REPORTED AND ASSESSED INCOME. THE BURDEN IS THEN ON THE ASSESSEE TO SHOW OTHERWISE, BY COGENT AND RELIABLE EV IDENCE. WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION, HAS BE EN DISCHARGED BY HIM, THE ONUS SHIFTS ON THE REVENUE TO SHOW 10 THAT THE AMOUNT IN QUESTION CONSTITUTED THE INCOME A ND NOT OTHERWISE. 18. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT TH E AMOUNT SURRENDERED BY THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WAS IN THE NATURE OF INC OME IN ITS HANDS, THE PENALTY ON THE SAME IS NOT LEVIABLE. 19. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF APRIL, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACOUNTANT MEMBER DATED : 29 TH APRIL, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH