2013 (6) TMI 547 - AT - Income Tax

Penalty u/s.271(1)(c) - assessment order passed u/s.143(3) r.w.s.153C - During the course of search and seizure action at the residential premises of Sri Chandrakant Kankaria, a real estate broker certain documents in loose paper were seized with some belonging to the assessee - assessee by not offering the commission received has concealed the income - Held that - Since the assessee was due to receive commission on the basis of sale of plots and since 7 plots have been sold during the F.Y. 2006-07 relevant to A.Y. 2007-08, therefore, the assessee was supposed to offer commission income on account of sale of the above plots. Therefore, by not offering the commission income on account of sale of the above plots during A.Y. 2007-08 there is concealment of particulars of income and penalty is leviable on account of commission relatable to sale of the above plots. Argument of the assessee that the same shall be shown once all the plots are transferred is not a valid explanation as the assessee cannot shift the year of taxability of the commission income after the sale of the particular property by explaining that the same shall be offered to tax once all the plots are transferred. If the above proposition of the assessee is accepted then in that case an assessee can indefinitely shift his tax burden say by not transferring one plot out of 1000 plots where 999 plots have been sold and commission income is received. Therefore, assessee was supposed to have declared commission income of plots which were sold after due registration. By not offering the commission income the assessee has furnished inaccurate particulars of income for which penalty u/s.271(1)(c) is leviable. Minimum penalty being 100% of the tax sought to be evaded on account of non-disclosure of commission income on account of sale of the above plots should be levied. AO shall verify the above details including any left over item and compute the commission income relatable to sale of these plots, calculate the tax on that and levy the penalty u/s.271(1)(c). So far as the balance plots are concerned they all relate to F.Y. 2007-08, 2008-09 and 2009-10 and do not relate to any of the years under appeal. Therefore, merely because the assessee has received the commission income in the preceding years which has been shown as advance penalty u/s.271(1)(c) should not be levied since the registration of the plots, which is a pre- condition for getting the commission, is yet to be done. Thus appeal for A.Y. 2007-08 is partly allowed for statistical purposes and appeal for other years are allowed.

Summary

Issues Involved:
1. Legality of initiating proceedings under Section 153C of the Income Tax Act.
2. Justification of the additions made by the Assessing Officer (AO) on account of undisclosed commission income.
3. Validity of the penalty levied under Section 271(1)(c) of the Income Tax Act for concealment of income.

Issue-wise Detailed Analysis:

1. Legality of Initiating Proceedings under Section 153C:
The Tribunal first addressed the legal ground regarding the initiation of proceedings under Section 153C. It was noted that during a search at the premises of a third party, certain documents related to the assessee were seized. These documents contained details of payments made and to be made to the assessee on account of land transactions. The Tribunal found that the initiation of proceedings under Section 153C was in conformity with the provisions of the Income Tax Act, as the documents seized belonged to the assessee. Therefore, the additional ground raised by the assessee challenging the legality of the proceedings was dismissed.

2. Justification of the Additions Made by the AO:
The AO had made additions to the assessee's income based on the seized documents, which showed that the assessee received commission payments for facilitating the sale of plots. The assessee argued that these amounts were advances and not income, as the transactions were not completed. The AO, however, rejected this explanation, noting that the services provided by the assessee had value in the relevant years, and the payments received were indicative of income. The Tribunal upheld the AO's view, stating that the payments made to the assessee over the years were for services rendered and should be treated as income in the relevant years.

3. Validity of the Penalty under Section 271(1)(c):
The Tribunal then examined the penalty levied under Section 271(1)(c) for concealment of income. The assessee had not offered the commission income to tax in the respective assessment years and had shown the amounts as advances. The Tribunal found that for the assessment year (A.Y.) 2007-08, the assessee had received commission income related to the sale of certain plots, which were registered and sold. By not offering this income to tax, the assessee had furnished inaccurate particulars of income, justifying the penalty under Section 271(1)(c). The Tribunal directed the AO to verify the details and compute the penalty accordingly.

For the other assessment years (A.Y. 2001-02, 2002-03, 2004-05, and 2005-06), the Tribunal found that the registration of plots, a pre-condition for earning the commission, was not completed. Therefore, the amounts received could be treated as advances, and no penalty under Section 271(1)(c) was leviable for these years.

Conclusion:
The Tribunal concluded that the penalty under Section 271(1)(c) was justified for A.Y. 2007-08 due to the concealment of commission income related to the sale of plots. However, for the other assessment years, the amounts received were correctly treated as advances, and no penalty was warranted. The appeal for A.Y. 2007-08 was partly allowed for statistical purposes, while the appeals for the other years were allowed.