2016 (5) TMI 794 - HC - Income Tax

Capital gain not offered in original return of income - whether the Tribunal is justified in holding that the explanation offered by the assessee for not offering the capital gain in the original return on income was bonafide explain, when the fact and circumstances revealed that the assessee has declared the concealed income only on the detection of the same during the course of survey in the premises of developer? - Held that - Two authorities one CIT(Appeals) and another, Tribunal, after undertaking the fact finding exercise as to whether the explanation submitted is bonafide or not, has found that the appellant has acted in a bonafide manner and the explanation is accepted. As such, the aforesaid finding of fact should rest with the conclusion of the Tribunal since the judicial scrutiny by this Court is limited to only substantial questions of law. We are not at all impressed by the submission for two fold reasons. One, is that appreciation of evidence is once again a question of fact and not a question of law. The second, is that it is not a matter where the Tribunal has not considered the entire facts and circumstances of the case under which the income was offered by the assessee as the income from house property by submission of revised returns and payment of tax even before the proceedings were initiated by the department after survey. Apart from the above, the additional aspect is that the view of the Tribunal on acquiring property under barter system could not be totally ruled out even if the contention of the assessee was to be considered as to be bonafide or not. Under these circumstances, it cannot be said that the Tribunal has recorded a factual finding without their being any material. The moment one says that the material is not sufficient or the evidence on record was not properly appreciated it would result in upsetting the fact finding by the Tribunal, which is beyond the scope of judicial scrutiny. - Decided against revenue

Summary

Issues:
Whether the Tribunal was justified in accepting the explanation offered by the assessee for not declaring capital gains in the original return of income as bonafide, despite the income being detected during a survey at the premises of the developer.

Analysis:
The Tribunal considered the case where the assessee received built-up area from a developer, offered rental income from the property in the original return but did not declare capital gains. The survey at the developer's premises revealed this omission, prompting the assessee to disclose the long-term capital gains. The Tribunal found the explanation plausible, considering the complexities of tax treatment in Joint Development Agreements. The assessee's subsequent conduct of not challenging the taxability of capital gains further supported the bonafides. The Tribunal reasoned that the initial non-disclosure was not concealment but an error in computation, as the primary facts were true.

The Tribunal cited the Supreme Court's stance in a similar case, emphasizing that voluntary disclosure post-detection does not absolve from concealment penalty. The Court held that the assessee's surrender was not voluntary but reactive to the detection, indicating an intention to withhold true income. However, in the present case, the assessee revised the income post-survey, offering capital gains and paying due taxes promptly. The Tribunal, aligning with the CIT(A), deemed the explanation for the initial non-disclosure as bonafide, concluding the case was not suitable for penalty under section 271(1)(c) of the Act.

The High Court upheld the Tribunal's findings, emphasizing that the judicial review was limited to substantial legal questions. The Court rejected the revenue's challenge, stating that the Tribunal's fact-based determination of bonafide explanation was beyond its scope of scrutiny. The Court dismissed the appeal, noting that no substantial question of law arose, given the Tribunal's thorough consideration of the facts and circumstances leading to the revised income declaration.

In summary, the High Court upheld the Tribunal's decision, affirming the bonafide nature of the assessee's explanation for not initially declaring capital gains, post-survey disclosure, and timely tax payment. The Court emphasized the limited scope of judicial review in factual findings and dismissed the revenue's appeal, finding no substantial legal question warranting consideration.