Appeal Details
Counselvise Citation
[2016] 121 COUNSELVISE.COM (IT) 4308 (ITAT-INDORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-08-2016
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
13-06-2016
Assessment Year
2009-2010
Appeal Filed On
07-12-2015
Judgement Text
KISHAN CHAND DASWANI ITA NO. 725/IND/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, INDORE BEFORE SHRI D.T. GARASIA, HON'BLE JUDICIAL MEMBER ITA NO.725 /IND/2015 A.Y.2009-10 KISHAN CHAND DASWANI BHOPAL PAN AAYPD 5684M ::: APPELLANT VS INCOME TAX OFFICER 2(2) BHOPAL ::: RESPONDENT APPELLANT BY SHRI ASHISH GOYAL & SHRI N.D. PATWA RESPONDENT BY SHRI MOHD.JAVED DATE OF HEARING 29.6 .2016 DATE OF PRONOUNCEMENT 1 6 . 8 . 2016 O R D E R THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-I, BHOPAL, DATED 22.9.201 5. 2. THE SUM AND SUBSTANCE OF THE GROUNDS OF APPEAL OF TH E ASSESSEE IS THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED I N KISHAN CHAND DASWANI ITA NO. 725/IND/2015 2 SUSTAINING PENALTY OF RS. 5,08,790/- U/S 271(1)(C) OF THE ACT LEVIED BY THE A.O. 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE FIL ED REVISED RETURN OF INCOME ON 26.9.2009 DECLARING TOTAL INCOME OF RS.3,17,007/- AND AGRICULTURAL INCOME AMOUNTING TO RS.2,11,031/-. AFTER INVESTIGATING THE M ATTER, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SO LD TWO PLOTS FOR RS.25,96,000/- AND PURCHASED ONE HOUSE WITH THREE OTHER CO-OWNERS FOR RS.1,36,00,000/-. TH E ASSESSEE HAD INVESTED RS.49,35,000/- AND CLAIMED EXEMPTION U/S 54F OF THE ACT FOR LONG TERM CAPITAL GAI NS AMOUNTING TO RS. 22,28,881/-. THE ASSESSING OFFICER ISSUED A LETTER TO THE ASSESSEE TO SUBMIT DETAILS REGAR DING IMMOVABLE PROPERTY PURCHASED/SOLD IN RESPONSE TO WHI CH THE ASSESSEE SUBMITTED LETTER DATED 6.9.2011 WHEREFRO M IT WAS NOTICED THAT THE ASSESSEE HAS CLAIMED EXEMPTION U/S 54F TO THE TUNE OF RS.22,28,881/-. DURING THE COURS E OF KISHAN CHAND DASWANI ITA NO. 725/IND/2015 3 ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE ASSESSIN G OFFICER THAT THE ASSESSEE IS IN POSSESSION OF TWO RES IDENTIAL HOUSES VIZ. AT D-28, BDA COLONY, KOHEFIZA, BHOPAL AND 1 3, MANISHPURI COLONY, INDORE. ON EXAMINATION OF THE BALANCE SHEET THE ASSESSING OFFICER FOUND THAT THE RESIDENTI AL HOUSE AT BHOPAL WAS SHOWN IN THE BALANCE SHEET WHEREAS THE RESIDENTIAL HOUSE AT INDORE WAS NOT SHOWN IN THE BALANCE . THE ASSESSING OFFICER, THEREFORE, ISSUED SUMMONS U/ S 131 OF THE ACT TO THE ASSESSEE IN RESPONSE TO WHICH THE ASSESSEES UNCLE SHRI LALCHAND DASWANI ATTENDED. THEREAFTER THE ASSESSEE APPEARED AND IN HIS STATEMENT HE ADMITTED HAVING OWNED BOTH THE ABOVE RESIDENTIAL HOUSES . SINCE THE ASSESSEE HIMSELF ADMITTED HAVING TWO RESIDEN TIAL HOUSES, ONE OF WHICH WAS NOT SHOWN IN THE BALANCE SHEE T, THE ASSESSING OFFICER DISALLOWED THE ASSESSEES CLAIM OF RS.22,28,881/- FOR EXEMPTION U/S 54F OF THE ACT. TH E KISHAN CHAND DASWANI ITA NO. 725/IND/2015 4 LEARNED ASSESSING OFFICER ALSO RECORDED HIS SATISFACTIO N IN THE ASSESSING OFFICER THAT IN VIEW OF THIS, I AM SATISFIED THAT THE ASSESSEE HAS SUBMITTED INACCURATE PARTICUL ARS WHICH HAS RESULTED IN THE CONCEALMENT OF TOTAL INCO ME THEREFORE PENALTY U/S 271(1)(C) IS INITIATED FOR TH IS CLAIM OF U/S 54F. THE VERY FACT THAT THERE IS A SPECIFIC EXP LANATION BROUGHT TO STATUTE BY FINANCE ACT, 2000 WITH EFFECT IVE FROM 01.04.2001, THE ASSESSEE HAS KNOWINGLY FILED WRONG CLAIM WHICH CLEARLY ATTRACT PENALTY U/S 271(1)(C). ACCORDINGLY, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND ISSUED SHOW CAUSE NOTICE U/ S 271(1)(C) READ WITH SECTION 274(2) OF THE ACT IN RE SPONSE TO WHICH THE ASSESSEE SUBMITTED THAT THE HOUSE AT INDORE WAS CO-OWNED BY THE ASSESSEE AND AS SUCH THE ASSESSEE IS NO T LIABLE TO PENALTY. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER HELD THAT FROM THE FACTS KISHAN CHAND DASWANI ITA NO. 725/IND/2015 5 MENTIONED IN THE ASSESSMENT ORDER AND ACCEPTED BY T HE ASSESSEE, IT IS QUITE EVIDENT THAT THE ASSESSEE WAS AWARE OF THE OWNERSHIP OF TWO HOUSES AT THE TIME OF CLAIMING EXEMPTION U/S 54F OF THE INCOME TAX ACT, 1961. IT I S, THEREFORE, CLEAR THAT THE ASSESSEE HAS KNOWING CLAI MED WRONG DEDUCTION U/S 54F OF THE INCOME TAX ACT, 1961 FOR WHICH HE IS OTHERWISE NOT ELIGIBLE. THE ASSESSING OFFICER, THEREFORE, LEVIED PENALTY OF RS.5,08,790/-. ON APPEAL , THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE, UPHELD THE PENALTY LEVIED BY THE ASSESSING OFFICER. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL. 4. BEFORE ME, THE ONLY SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THE ASSESSEE UNDER GO OD FAITH WAS UNDER AN IMPRESSION THAT THE CO-OWNED PROPERT Y WAS NOT TO BE CONSIDERED AND, AS SUCH, THE ASSESSEE DID KISHAN CHAND DASWANI ITA NO. 725/IND/2015 6 NOT SHOW THE SAME IN THE BALANCE SHEET. HE, THEREFORE, SUBMITTED THAT AS SUCH NO PENALTY IS LEVIABLE. 5. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW WITH THE SUBMISSION THAT THE ASSESSEE HAS UTTERLY FAILED TO PROVE HIS CASE AND HAS NO EXPLANATION FOR NOT SHOWING THE PROPERTY AT INDORE IN THE BALANCE SHEET. AS SUCH, THE ORDERS OF THE AUTHORITIES BELOW DESERVE TO BE SUSTAINED. 6. HAVING HEARD BOTH THE SIDES, I AM FULLY SATISFIED TH AT THE ASSESSEE HAS CONCEALED THE OWNERSHIP OF PROPERTY SITUATED AT INDORE AND HAS NOT SHOWN THE SAME IN THE BALANCE SHEET AND CLAIMED DEDUCTION U/S 54F OF THE ACT. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD SOLD PLO T NO.321, BHOPAL AND PLOT NO. B-3 INDORE. THE ASSESSEE F ILED RETURN OF INCOME WHEREIN THE ASSESSEE HAS INVESTED KISHAN CHAND DASWANI ITA NO. 725/IND/2015 7 RS.49,35,000/- AS HIS SHARE IN PURCHASE ON THE BASIS OF WHICH HE CLAIMED EXEMPTION U/S 54F OF THE ACT FOR LO NG TERM CAPITAL GAIN AMOUNTING TO RS.22,28,881/-. DURING T HE ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ASSESSEE H AD TWO RESIDENTIAL HOUSES ONE AT BDA COLONY, KOHEFIZA, BHOPAL AND 13, MANISHPURI COLONY, INDORE. THE ASSESSIN G OFFICER HAS RECORDED THE STATEMENT OF THE ASSESSEES U NCLE LALCHAND WASWANI WHEREIN HE HAS CONFIRMED THAT THE ASSESSEE IS IN JOINT OWNERSHIP OF ONE PROPERTY AT MANISHPURI, INDORE. THE ASSESSEE HAS ACCEPTED THESE TWO HOUSES. THEREAFTER, THE ASSESSEE HAD WITHDRAWN HIS CL AIM U/S 54F OF THE ACT FOR WHICH PENALTY HAS BEEN IMPOSED . THE BHOPAL PROPERTY WAS CONSTRUCTED IN FINANCIAL YEAR 2006-07, INDORE PROPERTY WAS CONSTRUCTED IN THE FINAN CIAL YEAR 1998-99 AND NEW RESIDENTIAL HOUSE WAS PURCHASED AT BHOPAL ON 6.3.2009. FROM THIS FACT, IT IS CLEAR THAT TH E KISHAN CHAND DASWANI ITA NO. 725/IND/2015 8 ASSESSEE WAS HAVING TWO HOUSES AND HE HAS WRONGLY CLAIMED EXEMPTION U/S 54F OF THE ACT. 7. THE LEARNED COUNSEL FOR THE ASSESSEE TRIED TO EMPHASIZE ON SECTION 54F AND HE MAINLY RELIED UPON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE REPORTED AS 23 TAXMAN.COM 299 WHEREIN IT WAS HELD THAT THE ASSESSEE HELD A PROPERTY JOINTLY WITH HER HUSBAND. SHE HAS TRANSFERRED ANOTHER PROPERTY OWNED BY HER INDIVIDU ALLY FOR CONSIDERATION UNDER THE DEVELOPMENT AGREEMENT. WHETHER THE JOINT OWNERSHIP OF THE PROPERTY COULD B E HELD TO STAND IN HER WAY OF CLAIMING EXEMPTION U/S 54F - H ELD NO. THE ASSESSEE DID NOT OWN ANY PROPERTY IN THE STATU S OF INDIVIDUAL AS ON DATE OF TRANSFER. HER CLAIM WAS ALLOWED. IN THE INSTANT CASE ON THE DATE OF TRANSFER, THE ASSESSEE W AS HAVING TWO PROPERTIES ONE IN INDIVIDUAL CAPACITY AND ANOTHER IN THE CAPACITY OF CO-OWNER. THEREFORE, IN MY OPINION, THIS JUDGMENT OF THE HON'BLE HIGH COURT WI LL NOT KISHAN CHAND DASWANI ITA NO. 725/IND/2015 9 BE HELPFUL TO THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. RASIKLAL N . SATREA; 98 ITD 335 (MUM) WHEREIN IT IS HELD THAT THE ASSESSEE CLAIMED EXEMPTION U/S 54F BY INVESTING CAPITAL GAIN IN PURCHASE OF RESIDENTIAL FLAT. THE ASSESSEE WAS ALREADY CO-OWNER OF ANOTHER FLAT. THE EXEMPTION U/S 54F IS TO BE ALLOWED. IN THE INSTANT CASE, THE FACTS ARE ENTIRE LY DIFFERENT WHILE HE HAS CLAIMED EXEMPTION U/S 54F. THE ASSESSEE WAS HAVING ONE RESIDENTIAL HOUSE AND HE WAS CO- OWNER OF THE SECOND HOUSE WHICH WAS NOT SHOWN IN THE BALANCE SHEET. 8. LOOKING TO THE SEQUENCE OF EVENTS IN THIS CASE, IT BECOMES CLEAR THAT THE ASSESSEE HAS NOT SHOWN THE HOUSE AT INDORE IN THE BALANCE SHEET, THEREFORE, THE ASSESSI NG OFFICER HAS TO MAKE INQUIRY BY CALLING HIS UNCLE AND THEREAFTER THE ASSESSEE HAS ADMITTED THAT HE IS THE CO- KISHAN CHAND DASWANI ITA NO. 725/IND/2015 10 OWNER OF THE PROPERTY AT INDORE AND, THEREAFTER, HE H AD WITHDRAWN HIS CLAIM. THEREFORE, THE ASSESSEE WAS NOT CLAIMING ANY EXEMPTION UNDER ANY BONAFIDE BELIEF. THE ASSESSEE WANTED TO HIDE THE INFORMATION REGARDING HIS SECOND HOUSE. THEREFORE, THE PARTICULARS HAVE BEEN CONCEALED BY THE ASSESSEE AND WHEN THE ASSESSEE CONCEALED THE INFORMATION AND CLAIMED EXEMPTION U/S 54F , THE PENALTY HAS BEEN RIGHTLY LEVIED BY THE AUTHORITIES BELOW. THE LEARNED CIT(A) HAS DEALT WITH THIS ISSUE AT LENGTH AS UNDER :- 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. SECTION 54 OF THE I.T ACT DEALS WITH THE CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE . AS PER THE SECTION: 54F. (1) [SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDE D FAMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPI TAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ON E YEAR BEFORE OR [TWO YEARS] AFTER THE DATE ON WHICH THE TRANSFER TOOK PL ACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE [CON STRUCTED, ONE RESIDENTIAL KISHAN CHAND DASWANI ITA NO. 725/IND/2015 11 HOUSE IN INDIA] (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; IF THE COST OF THE NEW ASSET IS LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAIN AS BEAR S TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45 : [ PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL AP PLY WHERE (A) THE ASSESSEE, (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF THE ORIGI NAL ASSET; OR (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NE W ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE OR IGINAL ASSET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER THAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS CHARGEABLE UN DER THE HEAD 'INCOME FROM HOUSE PROPERTY'.] 6. AS PER THE SECTION IT IS CLEAR THAT THIS SECTIO N WOULD NOT APPLY IN THOSE CASES WHERE THE ASSESSEE OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET. HERE AS PER THE ASSEES OWN SUBMISSIONS HE OWNS 2 RESIDENTIAL PROPERTIES IN ADDITION TO THI S NEW ASSET, ONE OF WHICH HE IS THE ABSOLUTE OWNER AND ONE OF WHICH HE IS A COOWNER . THE ACT ITSELF HAS NOT DISTINGUISHED BETWEEN PART OWNERSHIP AND FULL OWNER SHIP WITH REGARD TO THIS SECTION. THE WORD USED IS OWNS. THEREFORE FOR THE PURPOSES OF THIS SECTION THE KISHAN CHAND DASWANI ITA NO. 725/IND/2015 12 APPELLANT OWNS TWO HOUSES IN ADDITION TO THE NEW AS SET. IN VIEW OF THIS, SECTION 54 F WILL NOT BE APPLICABLE IN THE CASE OF THE APPELLA NT. 7. IT IS ALSO TO BE NOTED THAT AT THE TIME OF FI LING THE RETURN AND CLAIM OF EXEMPTION U/S 54 F, THE ASSESSE HAD CLAIMED OWNERSHIP OF ONLY ONE HOUSE. IT WAS ONLY DURING THE TIME OF ASSESSMENT PROCEEDINGS THAT IT WAS ASCE RTAINED THAT THE APPELLANT HAD ANOTHER HOUSE IN POSSESSION OF WHICH HE WAS THE COO WNER IN INDORE. IT HAS BEEN CLEARLY MENTIONED BY THE A.O THAT THE REFERRED RES IDENTIAL HOUSE AT BHOPAL WAS SHOWN IN THE BALANCE SHEET WHEREAS THE RESIDENTIAL HOUSE AT INDORE WAS NOT SHOWN IN THE BALANCE SHEET OF THE ASSESSEE. 8. THEREAFTER, THE A.O MADE FIELD ENQUIRIES AND IT WAS ONLY AFTER EFFORTS BY THE A.O THAT THE APPELLANT CONFIRMED THAT HE OWNED BOTH THE HOUSES. THUS IT IS CLEAR THAT HAD IT NOT BEEN FOR THE SCRUTINY PROCEEDINGS AND FI ELD ENQUIRIES IN THIS CASE, THE APPELLANT WOULD HAVE FALSELY CLAIMED EXEMPTION U/S 54F. IT IS CLEAR THAT THE ASSESSE HAD FILED INACCURATE PARTICULARS OF INCOME AND CONCEALED THE FACT THAT HE OWNED TWO HOUSES WHILE CLAIMING EXEMPTION U/S 54F. THE APPELLANT HIMSELF HAS NOT FILED FURTHER APPEAL AGAINST THE ORDER OF THE A.O WITH REGARD TO THE QUANTUM ADDITION. 8. LAW ON THE ISSUE OF CONCEALMENT IS VERY CLEAR. SOME OF THE CASES DECIDED IN RECENT TIMES SIMILAR IN FAC TS ARE AS BELOW; 8.1 [2015] 57 TAXMANN.COM 389 (DELHI), HIGH COURT OF DE LHI, COMMISSIONER OF INCOME-TAX VS NG TECHNOLOGIES LTD. SECTION 271(1)(C), READ WITH SECTION 28(I), OF THE INCOME-TAX ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME (DISALLOWANCE OF CLAIM, EFFEC T) - ASSESSMENT YEAR 2006-07 - WHETHER WHERE ASSESSEE CLAIMED LOSS ON SALE OF FIXE D ASSETS IN PROFIT AND LOSS ACCOUNT WHICH WAS A CAPITAL LOSS, SAME WAS CONTRARY TO BASI C PRINCIPLES OF ACCOUNTANCY - HELD, YES - WHETHER SINCE ASSESSEE DID NOT FILE REVISED RETUR N FOR SAME VOLUNTARILY BUT HAD FILED REVISED RETURN AFTER ASSESSING OFFICER CONFRO NTED ASSESSEE AND THEY WERE ASKED TO EXPLAIN CLAIM OF LOSS IN QUESTION IN PROFIT AND LOS S ACCOUNT PENALTY UNDER SECTION 271(1)(C) WAS SUSTAINABLE - HELD, YES [PARAS 17 AND 2 0] [IN FAVOUR OF REVENUE] ( EMPHASIS SUPPLIED) KISHAN CHAND DASWANI ITA NO. 725/IND/2015 13 8.2 IN ZOOM COMMUNICATIONS [2010] 191 TAXMAN 179 (DELHI), HIGH COURT OF DELHI, COMMISSIONER OF INCOME-TAX V ZOOM COMMUNI CATION (P.) LTD . BADAR DURREZ AHMED AND V.K. JAIN, JJ, IT APPEAL NO. 7 OF 2010, MAY 24, 2010, SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 - PEN ALTY - FOR CONCEALMENT OF INCOME - WHETHER SO LONG AS ASSESSEE HAS NOT CONCEALED ANY M ATERIAL FACT OR ANY FACTUAL INFORMATION GIVEN BY HIM HAS NOT BEEN FOUND TO BE I NCORRECT, HE WILL NOT BE LIABLE TO IMPOSITION OF PENALTY UNDER SECTION 271(1)(C), EVEN IF CLAIM MADE BY HIM IS UNSUSTAINABLE IN LAW, PROVIDED THAT HE EITHER SUBSTANTIATES EXPLA NATION OFFERED BY HIM OR EXPLANATION, EVEN IF NOT SUBSTANTIATED, IS FOUND TO BE BONA FIDE - HELD, YES - WHETHER IF ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW, BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAI M IS NOT FOUND TO BE BONA FIDE, EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND ASSESSEE WILL BE LIABLE TO PENALTY - HELD, YES 20. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF T HE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT AN Y BASIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE B ONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW THAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT B E LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENSE TO UNSCRUPULOUS ASSESSEES TO MAKE WHOLLY UN TENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM, IN T HE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED O N THE BASIS OF SELF-ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTED FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PA YABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS N ATURE, ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WO ULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PIC KED UP FOR SCRUTINY. THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROV ISIONS IN THE ACT HAVE. 8.3 HONBLE DELHI HIGH COURT IN THE MATTER OF ESCORTS FINANCE LIMITED ; [2010] 188 TAXMAN 87 (DELHI) HAS HELD: SECTION 271(1)(C), READ WITH SECTION 35D, OF THE IN COME-TAX ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME - ASSESSMENT YEAR 1995-96 - A SSESSEE CLAIMED 1/10TH OF ITS PUBLIC ISSUE EXPENSES UNDER SECTION 35D - ASSESSING OFFICE R DISALLOWED ITS CLAIM ON GROUND THAT ASSESSEE WAS NOT AN INDUSTRIAL UNDERTAKING AND ALSO IMPOSED PENALTY UNDER SECTION 271(1)(C) ON IT ON GROUND OF FURNISHING INACCURATE PARTICULARS BY CLAIMING INADMISSIBLE EXPENSES - WHETHER SINCE ASSESSEE WAS A FINANCE COM PANY AND NOT AN INDUSTRIAL UNDERTAKING AND IT WAS ALREADY IN BUSINESS WHEN PUB LIC ISSUE WAS RAISED, ITS CLAIM IN RESPECT OF PUBLIC ISSUE EXPENSES UNDER SECTION 35D WAS CLEARLY INADMISSIBLE AND SAME KISHAN CHAND DASWANI ITA NO. 725/IND/2015 14 COULD NOT BE TREATED AS BONA FIDE ONLY BECAUSE INSE RTION IN THAT BEHALF WAS MADE IN PROSPECTUS PURPORTEDLY ON BASIS OF LEGAL OPINION - HELD, YES - WHETHER, THEREFORE, ASSESSING OFFICER WAS JUSTIFIED IN LEVYING PENALTY UNDER SECTION 271(1)(C) ON ASSESSEE - HELD, YES 8.4 HONOURABLE SUPREME COURT IN THE CASE OF DHARAMENDRA TEXTILE PROCESSORS [2008] 174 TAXMAN 571 (SC) HAS HELD: 25. THE EXPLANATIONS APPENDED TO SECTION 272(1)(C) OF THE INCOME-TAX ACT ENTIRELY INDICATES THE ELEMENT OF STRICT LIABILITY ON THE AS SESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING RETURN. THE JUD GMENT IN DILIP N. SHROFFS CASE (SUPRA) HAS NOT CONSIDERED THE EFFECT AND RELEVANCE OF SECT ION 276C OF THE INCOME-TAX ACT. OBJECT BEHIND ENACTMENT OF SECTION 271(1)(E) READ WITH EXP LANATIONS INDICATE THAT THE SAID SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FO R LOSS OF REVENUE. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY. WILFUL CONCEAL MENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MA TTER OF PROSECUTION UNDER SECTION 276C OF THE INCOME-TAX ACT. 8.5 IN THE CASE OF DEVELOPMENT CREDIT BANK LIMITED: 2012-TIOL-722-ITAT-MUM INCOME TAX - SECTION 271(1)(C) - WHETHER THE ASSESSEE CAN TAKE PLEA OF BONAFIDE MISTAKE FOR THE PURPOSE OF SEC 271(1)(C) WHEN THE C LAIM OF THE ASSESSEE WAS ABSOLUTELY AND PATENTLY ILLEGAL AND CONTRARY TO THE PROVISIONS OF LAW. ++ THE ASSESSEE IS MANAGED BY THE BODY OF EXPERTS P ARTICULARLY IN THE FIELD OF FINANCE AND FISCAL. APART FROM THIS, THE ASSESSEE IS ALSO AVAIL ING THE SERVICES OF THE PROFESSIONALS AND TAX EXPERTS IN DAY TO DAY AFFAIRS AND PARTICULARLY FOR TAX MATTERS, THEREFORE, IT IS NOT EXPECTED FROM THE BANK LIKE ASSESSEE THAT THEY WERE N OT AWARE OF THE CHANGES IN THE ACT WHICH HAD DIRECT BEARING ON THE DAY TO DAY AFFAIRS AND FINANCIAL RESULTS OF THE ASSESSEE; ++ THE CLAIM OF THE ASSESSEE DECLARING THE DIVIDEND FROM UTI MIP AS EXEMPT INCOME AND INCLUDED THE SAME UNDER THE HEAD INTEREST INCOME EXEMPTED U/S 10(15) IS A PATENTLY ILLEGAL AND WRONG CLAIM AND THERE IS NO POSSIBILITY OF TWO VIEWS ON THIS POINT; ++ THE CONDUCT OF THE ASSESSEE SHOWS THAT THE ASSES SEE TRIED TO TEST THE TAXING AUTHORITIES WHETHER THEY WERE AWAKENING OR NOT AND A BLE TO FIND OUT THE WRONG CLAIM MADE BY THE ASSESSEE. THE CLAIM OF THE ASSESSEE WAS WHOLLY UNTENABLE AND UNSUSTAINABLE AND BUT FOR THE SCRUTINY UNDERTAKEN BY THE AO, THE SAME COULD NOT HAVE BEEN DETECTED. KISHAN CHAND DASWANI ITA NO. 725/IND/2015 15 ++ IT IS ONLY ON THE INSISTENCE OF THE AO THE ASSES SEE FILED THE DETAILS OF THE EXEMPT INCOME, THEREFORE, THE ASSESSEE CANNOT TAKE TO THE B ENEFIT OF BONAFIDE MISTAKE OR BONAFIDE EXPLANATION WHEN THE CLAIM OF THE ASSESSEE WAS ABSOLUTELY AND PATENTLY ILLEGAL AND CONTRARY TO THE PROVISIONS OF LAW; 9 NON FILING OF APPEAL BY THE APPELLANT AGAINST THE ADDITIONS MADE BY THE AO CLEARLY DEMONSTRATES THAT THE APPELLANT WAS WELL AWARE THAT ITS CLAIM FOR THE EXPENSES DISALLOWED WAS NOT MAINTAINABLE. BY CLAIMING THESE EXPENSES THE APPELLANT HAS MOST DEFINITELY FURNISHED INACCURATE PARTICULARS OF INCO ME WITHIN THE MEANING OF EXPLANATION - 1 OF SECTION 271(1)(C) OF THE INCOME TAX ACT AND IS , THEREFORE, LIABLE FOR PENALTY UNDER THIS SECTION. 10. THUS THE A.O. IS FOUND JUSTIFIED IN IMPOSING MI NIMUM PENALTY U/S 271(1)(C) FOR THIS A.Y. 2009-10. ACCORDINGLY, PENALTY LEVIED AT RS. 5, 08,790/- IS, HEREBY, CONFIRMED. 11. IN THE RESULT, THE APPEAL IS DISMISSED 9. I HAVE CAREFULLY GONE THROUGH THE FINDINGS RECORDE D BY THE LEARNED CIT(A) WHO HAS DEALT WITH EACH AND EVERY ASPECT OF THE ISSUE INVOLVED. I, THEREFORE, AGREEING WITH THE FINDINGS OF THE LEARNED CIT(A), HOLD THAT THERE IS CL EARLY A CONCEALMENT ON THE PART OF THE ASSESSEE AND AS SUCH THE LEARNED CIT(A) WAS FULLY JUSTIFIED IN CONFIRMING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF TH E ACT. IN KISHAN CHAND DASWANI ITA NO. 725/IND/2015 16 THIS VIEW OF THE MATTER, THE ORDERS OF THE AUTHORITIE S BELOW ARE CONFIRMED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. PRONOUNCED IN OPEN COURT ON 16 TH AUGUST, 2016 SD/- ( D.T. GARASIA) JUDI CIAL MEMBER 16 TH AUGUST, 2016 DN/- KISHAN CHAND DASWANI ITA NO. 725/IND/2015 17
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