DCIT, CORPORATE CIRCLE-2, COIMBATORE V. M/S. DHANDAYUTHAPANI FOUNDRY PVT. LTD., COIMBATORE

ITA 698/CHNY/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8316 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 02-08-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K. RAGHU
• Keywords: Principle of natural justice; Capital Gains
• Section: 147; 271(1)(c); 139(1); 139(4); 119

Judgement Text

आयकर अपील य अ धकरण, ‘सी’ यायपीठ, चे नई IN THE INCOME TAX APPELLATE TRIBUNAL , ‘C’ BENCH, CHENNAI ी वी . द ु गा राव, या यक सद य एवं ीजी.मंज ु नाथ, लेखा सद य के सम$ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER आयकरअपीलसं./I . T. A. No. 6 9 8/ Chn y/ 2 0 2 0 ( नधा रणवष / A ss e ss m en t Yea r : 2 00 8 - 09 ) Deputy Commissioner of Income Tax, Corporate Circle-2 Coimbatore. V s M/s. Dhandayuthapani Foundry Pvt.Ltd. Door No.1/4, Vetrivel Layout Opp. To DPF Electricals, Vilankurichi Post Vilankurichi Road, Coimbatore-641 035. PA N: A AA CD 6 1 5 1 G (अपीलाथ /Appellant) ( यथ /Respondent) अपीलाथ क ओरसे/ Appellant by : Mr. G.Johnson, Addl.CIT यथ क ओरसे/Respondent by : Mr. K. Raghu, C.A. स ु नवाईक तार ख/D a t e o f h e a r i n g : 09.02.2022 घोषणाक तार ख /D a t e o f P r o n o u n c e m e n t : 23.02.2022 आदेश / O R D E R PER G.MANJUNATHA, AM: This appeal filed by the Revenue is directed against order passed by the learned Commissioner of Income Tax (Appeals), Coimbatore-1, dated 31.01.2020 and pertains to assessment year 2008-09. 2. The Revenue has raised following grounds of appeal:- “1. The order of the learned CIT(Appeals), Coimbatore-1 is against facts and circumstances of the case. 2.The learned CIT(Appeals), Coimbatore-1 has erred in allowing assessee’s appeal against the penalty order u/s. 2 ITA No. 698/Chny/2020 271(1)(c) passed n 29.03.2017 by the Assessing Officer, as bared by the limitation u/s.275(I) of the Income tax Act, 1961. 3. The Learned CIT (AppeaIs) Coimbatore-1 has erred to appreciate the fact that the penalty order can be imposed within one year from the end of the financial year in which the order of the Commissioner(Appeals) is received by the (Principal Chief Commissioner) or envisaged in paragraph 2 of Section 275(1) of the Income Tax Act, 1961. 4. The learned CIT(Appeals), Coimbatore-1 has erred to appreciate the fact that in the instant case, the penalty order has been passed on 29.03.2017, which is within one year from the date of receipt of order from the Id. CIT(A). 5. From these and other grounds that may be adduced at the time of hearing, the order of the Commissioner of Income tax (Appeals), Coimbatore-1 may be cancelled and that of the Assessing Officer restored.” 2. At the outset, we find that there is a delay of 119 days in appeal filed by the revenue. During the course of hearing, when defect was brought to the notice of learned DR present for the submitted that delay in filing of appeal is mainly due to lockdown imposed by the Govt. on account of spread of Covid- 19 infections and in view of Hon’ble Supreme Court suo motu Writ Petition No.3 of 2020, if the period of delay is covered within the period specified in the order of the Apex Court , then same needs to be condoned in view of specific problem faced by the public on account of Covid-19 pandemic. 3 ITA No. 698/Chny/2020 3. The learned AR, on the other hand, fairly agreed that delay may be condoned in the interest of justice. 4. Having heard both sides and considered reasons given by the learned DR, we find that the Hon’ble Supreme Court in suo motu Writ Petition No.3 of 2020, has extended limitation applicable to all proceedings in respect of courts and tribunals across the country on account of spread of Covid-19 infections w.e.f. 15.03.2020, till further orders and said general exemption has been extended from time to time. We further noted that delay noticed by the Registry pertains to the period of general exemption provided by the Hon'ble Supreme Court extending limitation period applicable for all proceedings before Courts and Tribunals and thus, considering facts and circumstances of the case and also in the interest of natural justice, we condone delay in filing appeal filed by the Revenue . 5. Brief facts of the case are that the assessee company has filed its return of income for assessment year 2008-09 on 31.03.2009 admitting total income of Rs.4,23,718/- and said 4 ITA No. 698/Chny/2020 return was subsequently revised on 30.09.2009 declaring total loss of Rs.18,01,000/- . The assessment for the impugned assessment year has been completed u/s.143(3) of the Act, on 28.12.2010, assessing long term capital gain of Rs.10,11,12,800/- on protective basis, because substantive addition was made for the assessment year 2006-07. The assessee preferred an appeal before the learned CIT(A). The learned CIT(A) directed the Assessing Officer to assess long term capital gain on substantive basis for the assessment year 2008-09. The assessee preferred further appeal before ITAT., Chennai, and the Tribunal, confirmed order of the learned CIT(A). In the meantime, on appeal filed by the revenue for the assessment year 2006-07, the Tribunal has directed the Assessing Officer to treat additions made towards long term capital gain for the assessment year 2008-09 on substantive basis. Subsequently, a survey u/s.133A of the Income Tax Act, 1961, was conducted on 29.10.2012 in the office premises of the assessee. Consequent to survey, assessment has been reopened u/s. 147 of the Income Tax Act, 1961, and assessment has been completed u/s.143(3) r.w.s 147 of the Act on 31.03.2014 and determined total income at 5 ITA No. 698/Chny/2020 Rs.39,31,14,573/-. The assessee challenged reassessment order and the learned CIT(A) for reasons stated in his appellate order allowed relief to the assessee. The revenue has accepted order of the learned CIT(A) and has not filed further appeal to the Tribunal. Thereafter, the Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the Act, and levied penalty of Rs.54,08,488/- on difference between long term capital gain admitted by the assessee and long term capital gain computed by the Assessing Officer which is equal to 100%of tax sought to be evaded. The relevant findings of the Assessing Officer are as under:- 7. The submissions of the assessee company and the facts of the case have been carefully considered. It is a fact that the assessee had disclosed the revised income only after the survey was conducted on the premise of the assessee company and the revised return of income was filed by the assessee only after receipt of the notice u/s 148. It was the statutory obligation on the part of the assessee to disclose such income and tile the return of income in the manner prescribed within the due date prescribed in section 139(1) or u/s 139(4) of the Income tax Act, 1961. Failure to do so has attracted provisions of section 271(1) (c) for concealment of income and the claim of the assessee that there was no concealment of income is summarily rejected. 8. Assessee’s plea that they have no intention to conceal the income and that once survey operations had been conducted, they had voluntarily admitted the undisclosed income in the return of income subsequent to the survey operations and paid the taxes, is not a tenable argument. Assessee’s intention of concealing the income to the Department has been proven beyond doubt during survey operations and with the impounding of evidences during the course of survey, based on which the undisclosed income was admitted by the Director of the company. Thus, voluntary disclosure of the undisclosed incomes and payment of taxes thereon after the findings of survey 6 ITA No. 698/Chny/2020 operations will not absolve the assessee from the rigors of being penalized under appropriate sections of the Income tax Act, 1961. 9. Further, The Hon’ble Supreme Court in the case of MAK Data P. Ltd. vs. CIT-Il reported in 38 taxmann.com 448(SC)(2013) had clearly held that “Voluntary disclosure does not release assessee from mischief of penal proceedings under section 271(1)(c).The Hon’ble Court had in the course of its judgment held that surrender of income in the sense that the offer of surrender was made in view of detection made by the AU. In delivering the judgment, the Hon’ble Supreme Court held that • The Assessing Officer 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 offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. The Explanation to section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer, between reported and assessed income. • The burden is then on the assessee to show otherwise, by cogent and reliable evidence. • Statute does not recognize those types of defenses under Explanation 1 to Section 271(1)(c) of the Act. It is trite law that the voluntary disclosure does not release the assessee from the mischief of penal proceedings u/s 271(1)(c). The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he has to be absolved from penalty. The surrender of income on this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the Assessing Officer in the search conducted in the sister concern of the assessee. It that situation, it cannot be said that the surrender of income was voluntary. 10. In the instant case, only after detection during the survey proceedings, the assessee offered the revised capital gains when confronted with the sale deed found during the survey. It is also pertinent to mention that the provisions of Explanation-1 to section 271(1)(c) of the Act which provides as under: “Explanation 1 - Where in respect of any facts material to the computation of the total income of any person under this Act, 7 ITA No. 698/Chny/2020 A. Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer to be false or B. Such Person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then , the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purpose of clause(c) of this subsection, be deemed to represent the income in respect of which particulars have been concealed”. 11. Therefore, considering the facts and circumstances of the case, I hold that the assessee company has willfully concealed its income thereby being eligible and a fit case for levy of penalty u/s 271(1) (c) of the Income-Tax Act, 1961. I hold that in the interest of natural justice and at the same time adjudicating the assessee to be liable for penalty, a minimum penalty of 100% of the tax sought to be evaded u/s 271(1)(c) of the I.T.Act,l96l which is worked out as under will meet the ends of justice in the assessee’s case. Tax sought to be evaded on the Undisclosed Long Term Capital Gains of Rs.2,38,68,000 @20% Rs. 47,73,600 /- (Rs. 13,99,68,000-Rs. l1,61,00,000) Surcharge @10% : Rs. 4,77,360/- Add Education Cess @ 3% : Rs. 1,57,528 /- TOTAL PENALTY LEVIED Rs. 54,08,488 /-“ 6. Being aggrieved by the penalty order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee challenged penalty order passed by the Assessing Officer dated 29.03.2017 on limitation in light of provisions of section 275(1)(a) of the Income Tax Act, 1961, and argued that order passed by the Assessing Officer on 8 ITA No. 698/Chny/2020 29.03.2017 is beyond the period of six months from the end of the month in which order from the ITAT was received. The learned CIT(A), after considering relevant facts and also taken note of facts that the Tribunal order has been received by the O/o. Pr.CIT on 02.02.2016, held that penalty order passed by the Assessing Officer on 29.03.2017 is beyond six months from the end of the relevant month in which order of the Tribunal has been received by Pr.CIT and thus, quashed penalty order passed by the Assessing Officer and deleted penalty levied u/s.271(1)(c) of the Act. Aggrieved by the learned CIT(A) order, the Revenue is in appeal before us. 7. The learned DR submitted that the learned CIT(A) has erred in not appreciating fact that as per the provisions of section 275(1)(a) of the Income Tax Act, 1961, limitation for passing penalty order u/s.271(1)(c) of the Act, is within one year from the end of the financial year in which order of the learned CIT(A) is received by O/o. the Pr.CIT concerned or within six months from the end of the month in which order of the Tribunal is received by O/o. the Pr.CIT concerned, whichever period expires later. In this case, if you consider date of receipt of 9 ITA No. 698/Chny/2020 order of the learned CIT(A), then penalty order passed by the Assessing Officer on 29.03.2017 is within the period of one year from the end of the relevant assessment year and thus, the learned CIT(A) has clearly erred in considering limitation from the period order of the ITAT received by the O/o. the Pr.CIT concerned. 8. The learned AR for the assessee, on the other hand, supporting order of the learned CIT(A) submitted that as per second part of provisions of section 275(1)(a) of the Act, time limit prescribed for passing penalty order u/s.271(1)(c) of the Act, is within six months from the end of the month in which order of the ITAT is received by O/o. the Pr. CIT concerned. In this case, order of the Tribunal was received by O/o. the Pr.CIT concerned on 22.01.2016 and the period of six months expired on 31.07.2016. Since, penalty order passed by the Assessing Officer on 29.03.2017, is beyond limitation provided under the Act, and thus, learned CIT(A) has very rightly held that penalty order passed by the Assessing Officer is barred by limitation and cannot be sustained. 10 ITA No. 698/Chny/2020 9. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The provisions of section 275(1)(a) of the Act, deals with limitation for passing penalty order u/s.271(1)(c) of the Act . As per said section, the Assessing Officer can complete penalty proceedings u/s.271(1)(c) of the Act, within one year from the end of the financial year in which the order of the learned CIT(A) is received by O/o. Pr.CIT concerned or within six months from the end of the month in which order of the ITAT is received by O/o. the Pr.CIT concerned. In this case, order of the ITAT was received by the O/o. the Pr.CIT concerned on 22.01.2016 as confirmed by the Assessing Officer. As per provisions of section 275(1)(a), limitation for passing order levying penalty u/s.271(1)(c) of the Act, is six months from the end of the month in which order of the ITAT is received by the O/o. the Pr. CIT concerned and said period was expired on 31.07.2016. 10. The learned CIT(A), after considering relevant facts has recorded categorical finding that order of the ITAT was received by the O/o. the Pr.CIT concerned on 22.01.2016 and period of 11 ITA No. 698/Chny/2020 six months for passing penalty order expires on 31.07.2016 and thus, learned CIT(A) opined that penalty order passed by the Assessing Officer on 29.03.2017 is beyond due date prescribed u/s.275(1)(a) of the Income Tax Act, 1961. The said findings of the learned CIT(A) is uncontroverted. Therefore, we are of the considered view that there is no error in the reasons given by the learned CIT(A) to cancel order passed by the Assessing Officer levying penalty u/s.271(1)(c) of the Act, and thus, we are inclined to uphold order of the learned CIT(A) and dismiss appeal filed by the Revenue. 11. In the result, appeal filed by the revenue is dismissed. Order pronounced in the open court on 23 rd February, 2022 Sd/- Sd/- (वी. द ु गा राव) (जी. मंज ु नाथ) (V.Durga Rao) (G.Manjunatha ) #या यक सद&य /Judicial Member लेखा सद&य / Accountant Member चे#नई/Chennai, )दनांक/Dated 23 rd February, 2022 DS आदेश क त+ल,प अ-े,षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आय ु .त (अपील)/CIT(A) 4. आयकर आय ु .त/CIT 5. ,वभागीय त न2ध/DR 6. गाड फाईल/GF.