Ita/223/2013 Of Babu George v. Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY ,THE 06TH DAY OF SEPTEMBER 2018 / 15TH BHADRA, 1940 ITA.No. 223 of 2013 AGAINST THE ORDER/JUDGMENT IN ITA 499/2011 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 28-02-2013 APPELLANT/S: BABU GEORGECHANDRATHIL HOUSE, BCG BUNGLOW ANNEX, VILLA A H NO.33/2030-D, AMBEDKAR ROAD, VENNALA P.O., ERNAKULAM-682028. BY ADVS.SRI.M.GOPIKRISHNAN NAMBIARSMT.PREETHA S.NAIRSRI.K.JOHN MATHAISRI.P.BENNY THOMASSRI.P.GOPINATH RESPONDENT/S: COMMISSIONER OF INCOME TAXI.S.PRESS ROAD, ERNAKULAM, KOCHI-682018. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH SC FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 06.09.2018, ALONG WITH ITA.224/2013, ITA.222/2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ------------------------------------------- I.T.A.Nos. 222, 223 & 224 of 2013------------------------------------------- Dated this the 6[th] day of September, 2018 J U D G M E N T Ashok Menon, J. The main questions of law arising for consideration in the three appeals are as follows:- “i. Whether on the facts and circumstances of thecase the appellate tribunal was justified inpartly sustaining the order of the appellateauthority ?case the appellate tribunal was justified inpartly sustaining the order of the appellateauthority ? ii. Whether on the facts and circumstances of thecase the appellate tribunal was justified innot waiving the penalty in full when it hadaccepted the fact that the additional incomewas offered by the appellant voluntarily andit cannot be considered as a concealed incomeunder Section 271(1)(c) of the Income Tax Act?case the appellate tribunal was justified innot waiving the penalty in full when it hadaccepted the fact that the additional incomewas offered by the appellant voluntarily andit cannot be considered as a concealed incomeunder Section 271(1)(c) of the Income Tax Act? iii.Whether on the facts and circumstances ofthe case the appellate tribunal was justifiedin sustaining the order of the appellateauthority to the extent of 100% of thepenalty when it has been accepted by it thatthe additional income was offered voluntarilyby the appellant and it cannot be consideredas concealed income under Section 271(1)(c)of the Income Tax Act ?”the case the appellate tribunal was justifiedin sustaining the order of the appellateauthority to the extent of 100% of thepenalty when it has been accepted by it thatthe additional income was offered voluntarilyby the appellant and it cannot be consideredas concealed income under Section 271(1)(c)of the Income Tax Act ?” 2.The assessee, an NRI businessman, is aggrieved by the common order passed by the Income Tax Appellate Tribunal, Cochin Bench relating to three assessmentyears, from 2001-02 to 2003-04. The penalty levied underSection 271(1)(c) of the Income Tax Act, 1961(hereinafter referred to as “the Act”) by the AssessingOfficer (A.O.) was affirmed by the Commissioner of IncomeTax (Appeals). However, the quantum of penalty, which wasdirected to be paid at 200% of the tax on incomeconcealed, vide Annexure B order, was restricted to 100%by the Tribunal and the appeals were thus allowed inpart. 3.The facts in brief are that a search andseizure was carried out at the residence and officepremises of the assessee on 06.08.2003 and concealment ofincome for the three years was detected. In response toa notice under Section 153A, in ITA No.222/2013 theassessee filed a return declaring an income ofRs.14,50,200/- and an agricultural income ofRs.4,14,000/- for the assessment year 2001-02. Theassessment was competed on 07.03.2006 by addingRs.5,75,035/- as the undisclosed business income andRs.90,000/- by bringing the clubbing provisions underSection 64(1)(iv) of the Act. The appellant has paid the 3.The facts in brief are that a search andseizure was carried out at the residence and officepremises of the assessee on 06.08.2003 and concealment ofincome for the three years was detected. In response toa notice under Section 153A, in ITA No.222/2013 theassessee filed a return declaring an income ofRs.14,50,200/- and an agricultural income ofRs.4,14,000/- for the assessment year 2001-02. Theassessment was competed on 07.03.2006 by addingRs.5,75,035/- as the undisclosed business income andRs.90,000/- by bringing the clubbing provisions underSection 64(1)(iv) of the Act. The appellant has paid the amount in full. The addition was made by the A.O. on thebasis of the consideration disclosed from the sale deedsof land purchase at Nedumbassery, seized at the time ofsearch, which according to the A.O. was showing an amountless than the amount shown in the agreement for sale.That apart, the A.O. has also made an addition ofRs.90,000/-, pertaining to rent received by theappellant's wife on the ground that the building wasowned by the appellant, though the rent was received bythe appellant's wife. year 2002-03. In response to notice under Section 153A,the appellant had filed a return declaring an income ofRs.7,32,020/- and an agricultural income of Rs.5,27,000/-and the assessment was completed on 07.03.2006. The A.O.made an addition of Rs.84,000/-, being rent received byappellant's wife vide assessment order at Annexure B. 5.I.T.A.No.224/2013 pertains to the assessmentyear 2003-04. In response to the notice under Section153A, the appellant had filed a return declaring incomeof Rs.31,41,390/- and an agricultural income ofRs.4,75,400/-. The A.O. made an addition of Rs.1,05,000/-, which was the rent received by appellant'swife, vide assessment order at Annexure B. 6.The appellant's contention is that the AssessingAuthority and the appellate forum failed to notice thefact that pursuant to the notice under Section 153A ofthe Act, the appellant has suo motu declared additionalamount as income and offered the same for assessment.The additional income was not on the basis of anymaterials seized by the Department. The Tribunal oughtto have found that the return filed pursuant to thenotice should be treated as return filed under Section139. There was no concealment or furnishing ofinaccurate particulars by the appellant in the return soas to attract the penal provision under Section 271(1)(c)of the Act and hence the appellant seeks interference ofthis Court. 7.The learned Senior Standing Counsel, Governmentof India (Taxes) submits that it is consequent to asearch and seizure under Section 132 of the Act on06.08.2003 that the concealment of income was revealed.Consequent to that, notice under Section 153A of the Actwas issued for the years under consideration. The learned Senior Counsel points to the fact that theassessee did not file any returns for the years underconsideration prior to the date of search and that he hadfiled the returns for the first time only after receivingthe notice under Section 153A of the Act, which by itselfwould make the assessee liable to penalty. 8.The learned Counsel for the assessee relies onthe decision reported in Commissioner of Income Tax v.Reliance Petroproducts Pvt.Ltd., [2010] 322 ITR 158 (SC)in support of his argument that there has been noconcealment so as to attract the provisions under Section271(1)(c) of the Act. The Hon'ble Supreme Court referred to an earlier decision Dilip N. Shroff v. Joint CIT[2007] 6 SCC 329and held thus in paragraphs 9, 10 and 11of the judgment; extracted below:- learned Senior Counsel points to the fact that theassessee did not file any returns for the years underconsideration prior to the date of search and that he hadfiled the returns for the first time only after receivingthe notice under Section 153A of the Act, which by itselfwould make the assessee liable to penalty. 8.The learned Counsel for the assessee relies onthe decision reported in Commissioner of Income Tax v.Reliance Petroproducts Pvt.Ltd., [2010] 322 ITR 158 (SC)in support of his argument that there has been noconcealment so as to attract the provisions under Section271(1)(c) of the Act. The Hon'ble Supreme Court referred to an earlier decision Dilip N. Shroff v. Joint CIT[2007] 6 SCC 329and held thus in paragraphs 9, 10 and 11of the judgment; extracted below:- “9. Therefore, it is obvious that it must beshown that the conditions under section 271(1)(c)must exist before the penalty is imposed. Therecan be no dispute that everything would dependupon the return filed because that is the onlydocument, where the assessee can furnish theparticulars of his income. When such particularsare found to be inaccurate, the liability wouldarise. In Dilip N. Shroff v. Joint CIT [2007] 6SCC 329, this court explained the terms“concealment of income” and “furnishinginaccurate particulars”. The court went on tohold therein that in order to attract the penalty under section 271(1)(c), mens rea was necessary,as according to the court, the word “inaccurate”signified a deliberate act or omission on behalfof the assessee. It went on to hold that clause(iii) of section 271(1)(c) provided for adiscretionary jurisdiction upon the assessingauthority, inasmuch as the amount of penaltycould not be less than the amount of tax soughtto be evaded by reason of such concealment ofparticulars of income, but it may not exceedthree times thereof. It was pointed out that theterm “inaccurate particulars” was not definedanywhere in the Act and, therefore, it was heldthat furnishing of an assessment of the value ofthe property may not by itself be furnishinginaccurate particulars. xx xx 10. We are not concerned in the present casewith the mens rea. However, we have to only seeas to whether in this case, as a matter of fact,the assessee has given inaccurate particulars.In Webster's Dictionary, the word “inaccurate”has been defined as: “not accurate, not exact orcorrect; not according to truth; erroneous; as aninaccurate statement, copy or transcript.” 11. We have already seen the meaning of theword “particulars” in the earlier part of thisjudgment. Reading the words in conjunction, theymust mean the details supplied in the return,which are not accurate, not exact or correct, notaccording to truth or erroneous. We must hastento add here that in this case, there is nofinding that any details supplied by the assesseein its return were found to be incorrect orerroneous or false. Such not being the case,there would be no question of inviting thepenalty under section 271(1)(c) of the Act. Amere making of the claim, which is notsustainable in law, by itself, will not amount tofurnishing inaccurate particulars regarding theincome of the assessee. Such claim made in thereturn cannot amount to the inaccurateparticulars.” discernible from the records maintained by the assesseerevealed on search and subjected to seizure. Admittedly,there was no explanation offered by the assessee as tothe non-filing of the income tax return. Under suchcircumstances, we are of the opinion that the returnsfiled subsequent to the search would not absolve thepenal provisions under Section 271(1)(c) of the Act. 10. In Commissioner of Income Tax v. N.Jayaprakash, [2018] 400 ITR 99 (Ker.), a Division Bench of this Courthas held thus:- discernible from the records maintained by the assesseerevealed on search and subjected to seizure. Admittedly,there was no explanation offered by the assessee as tothe non-filing of the income tax return. Under suchcircumstances, we are of the opinion that the returnsfiled subsequent to the search would not absolve thepenal provisions under Section 271(1)(c) of the Act. 10. In Commissioner of Income Tax v. N.Jayaprakash, [2018] 400 ITR 99 (Ker.), a Division Bench of this Courthas held thus:- “If the concealment or furnishing of inaccurateparticulars of income is an act committed by theassessee at the time of filing the return, theliability of the assessee or the culpability ofthe assessee is his conduct at the time when hefiled the return.” 11. In view of the decisions cited above, we are of the opinion that failure on the part of the assessee to file the returns voluntarily, as statutorily prescribed, would be a culpable act or omission attracting penaltyunder Section 271(1)(c) of the Act. It was only subsequent to the search that the assessee filed returnsand this reveals the intention of the assessee to avoid payment of tax; if the search had not been taken out.There is also clear evidence of attempt to evade paymentof tax on rental income, which is received by his wifefor property belonging to him. The fact regarding thesale of the property in variance with the considerationmentioned in the agreement is also evidence of intentionto evade payment of tax. 12.The penalty originally levied was 200%,which was reduced to 100% by the Appellate Tribunal. Wefind no reason, whatsoever, to interfere with thatfinding of the Appellate Tribunal and the questions oflaw are answered in favour of the Revenue and against theassessee. The I.T.Appeals would stand dismissed. Noorder as to costs. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENONJUDGE APPENDIX APPELLANT(S)' ANNEXURES: ANNEXURE A : COPY OF THE ASSESSMENT ORDER FOR 2002-03 ISSUED BY THE INCOME TAXDEPARTMENT TO THE APPELLANT DATED 07.03.2006. ANNEXURE B : COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED08.06.2006 ISSUED TO THE APPELLANT. ANNEXURE C : COPY OF THE PENALTY ORDER DATED 31.03.2008 ISSUED BY THE ASSISTANTDIRECTOR OF INCOME TAX (INTERNAL TAXATION) TO THE APPELLANT. ANNEXURE D : COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED31.03.2011 TO THE APPELLANT. ANNEXURE E : COPY OF THE TRIBUNAL ORDER DATED 28.02.2013 ISSUED TO THE APPELLANT.