2015 (6) TMI 1190 - AT - Income Tax

Condonation of delay - delay in filing the appeal by 315 days - Penalty u/s 271(1)(c) - assessee made a conditional surrender of 50, 00, 000/- and paid the tax on the said surrender subject to no penalty u/s 271(1)(c) - HELD THAT - In the present case it appears that the assessee made a conditional surrender of 50, 00, 000/- and paid the tax on the said surrender subject to no penalty u/s 271(1)(c). The assessee also furnished copy of order sheet dated 21.12.2009 which is placed at page no. 2 of the assessee s compilation in the said order sheet also it is mentioned subject to no penal action. Therefore the assessee under bona fide believe that no penalty will be levied surrendered 50 lacs and did not prefer an appeal. In our opinion there was a reasonable cause in filing the appeal belated therefore the delay is condoned and the appeal is admitted. Reopening u/s 147 read with section 148 - unexplained entries in the bank account - HELD THAT - AO initiated the proceedings u/s 147 of the Act on the basis that there were certain entries in the bank account of assessee for which there was no proper explanation. AO also noticed that the assessee produced fabricated copy of bank account along with books of accounts and as such formed the belief that the assessee s income had escaped assessment. In the present case the assessee although filed the objection against the initiation of re-assessment proceedings u/s 147 of the Act however withdrew those objection and surrendered a sum of 50, 00, 000/- subject to no penal action. In the instant case when the assessee himself withdrew the objection filed against the initiation of re-assessment proceedings u/s 147 of the Act surrendered a sum of 50, 00, 000/- and paid the tax thereon in our opinion the ld. CIT was fully justified in upholding the proceedings initiated by the AO u/s 147 of the Act and in confirming the addition of 50, 00, 000/-. We therefore don t see any merit in this appeal of the assessee

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of notice issuance under section 148 of the IT Act.
3. Validity of reassessment proceedings under section 147 of the IT Act.
4. Confirmation of addition of Rs. 50,00,000/- by the Assessing Officer (AO).
5. Rejection of books of accounts by the AO.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal against the order dated 30/12/2011 of the CIT(A) with a delay of 315 days. The delay was attributed to the assessee's bona fide belief that no penalty would be imposed following a conditional surrender of Rs. 50,00,000/-. The penalty of Rs. 17,00,000/- imposed by the AO prompted the assessee to seek legal opinion, which led to the filing of the appeal. The tribunal condoned the delay, citing reasonable cause and the interest of justice, referencing multiple case laws such as Collector Land Acquisition vs. Mst. Katiji and Sandhya Rani Sarkar vs. Sudha Rani Debi.

2. Validity of Notice Issuance Under Section 148 of the IT Act:
The assessee challenged the issuance of notice under section 148, arguing it was based on a change of opinion. The AO issued the notice after discovering that the assessee had furnished a fabricated bank statement, leading to an alleged income escapement of Rs. 57,95,000/-. The tribunal upheld the issuance of the notice, noting that the AO had necessary sanction and approval. The CIT(A) also supported this, referencing case laws like CIT vs. Shapoorji Mistry and Raymond Woolen Mills Ltd. v. ITO, indicating that the AO correctly initiated proceedings to address the discovered discrepancies.

3. Validity of Reassessment Proceedings Under Section 147 of the IT Act:
The reassessment proceedings were contested on grounds of being initiated on incorrect grounds and not following the proper procedure. The assessee initially objected to the reopening but later withdrew the objections and surrendered Rs. 50,00,000/- subject to no penal action. The tribunal found that the AO had valid reasons to believe that income had escaped assessment due to the fabricated bank statement. The CIT(A) supported this view, stating that the AO's vigilance was justified and the reassessment proceedings were valid.

4. Confirmation of Addition of Rs. 50,00,000/- by the AO:
The AO added Rs. 50,00,000/- to the assessee's income, which was surrendered by the assessee under the condition of no penal action. The assessee argued that the amount represented past savings and advances for property sales. The AO rejected this claim, noting discrepancies in the books of accounts and the fabricated bank statement. The CIT(A) upheld the addition, stating that the surrender was made voluntarily and the assessee should not appeal against it. The tribunal agreed, confirming the addition as justified.

5. Rejection of Books of Accounts by the AO:
The AO rejected the assessee's books of accounts under section 145(3) of the Act, citing the absence of books during a survey and the later inclusion of a personal account. The tribunal noted that the fabricated bank statement and discrepancies justified the AO's rejection of the books. The CIT(A) also supported this decision, emphasizing the lack of proper records and the fabricated evidence.

Conclusion:
The tribunal dismissed the appeal, upholding the reassessment proceedings, the issuance of notice under section 148, the addition of Rs. 50,00,000/-, and the rejection of the books of accounts. The delay in filing the appeal was condoned, but the substantive grounds raised by the assessee were found to lack merit. The tribunal's decision was based on a thorough examination of the facts, legal precedents, and the assessee's conduct during the proceedings.