2016 (9) TMI 442 - AT - Income Tax

Penalty u/s 271(1)(c) - default in declaring the income - whether income is not assessable in the hands of assessee in his individual capacity at the first place and is rightly assessable in the hands of different person i.e. AOP? - Held that - plea of the assessee that the bank statement were given to the chartered accountant and he failed to offer the impugned income is too vague and bald to be assigned any acceptance. The bounden duty of assessee to furnish true and correct particulars of income in the return of income cannot be overemphasized. This income not offered at the first instance is of sizeable amount in the context of the case of assessee and could not ordinarily be lost sight of. It is not palatable to accept that a transaction of this magnitude routed through banking channel has been overlooked while determining taxable income. Be that as it may, apart from declaring the income as aforesaid; the assessee is expected to meet advance tax and self assessment tax obligations as per the framework of law. The assessee has not shown to have paid any tax towards impugned gain. Thus, this plea of oversight on behalf of the Assessee is listless. Hence, no case of reasonable cause for omitting to include the income in the first return is successfully made out. The preponderance of probabilities is weighed against the assessee. We also wish to note here that penalty proceedings in question are governed by S. 271(1)(c) read with Explanations appended thereto. The assessee is expected to justify his bonafides in the light of Explanation 1 of S. 271(1)(c) of the Act. The condonation of penalty for compliance failure on the grounds of reasonable cause as provided under S. 273B is foreign to the scope of S. 271(1)(c) of the Act. All the other co-owners except the assessee have discharged their tax obligations in their individual capacity. This serves as a clear indicator that while the parties may have agreed to come together for better co-operation, the parties were to bear their own losses or retain their own profits contrary to the case made out by the assessee. If the version of the Assessee is to be given any credence, one has to see the conduct of the assessee. The obligations of the Assessee as one of the members who allegedly combined to form alleged AOP is placed at par with other members to comply with tax laws. No PAN number in the capacity of AOP was reportedly obtained. The alleged AOP is also not shown to have paid any advance tax or self assessment tax which could have probably served as a guiding factor for appreciating bonafides. The return of income in the capacity of AOP for the combined income is not admittedly filed. Common bank account for alleged consortium is also not referred to. Thus, the onus of the existence of contract ( oral or written) for sale of property giving rise to impugned income in the capacity of AOP is not discharged at all. Coupled with this, the other alleged members have acted in their respective personal capacity which belies presence of any alleged understanding in the nature of purported AOP. The above is enumeration to show that no assertive justification has been advanced by the assessee to prove bonafides of plea of existence of AOP. Mere abstract reliance on case laws without any connection with the underlying facts deserves to be discredited. In the light of above discussion, the explanation offered for the default in declaring the income is palpably improbable. Omission to declare chargeable income cannot be held to be a bonafide error in the given circumstances. Hence, we find no error in the orders of the authorities below in imposing penalty under S. 271(1)(c) of the Act. - Decided against assessee

Issues Involved:
1. Legitimacy of penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Timeliness and validity of revised returns filed by the assessee.
3. Assessment of income in the hands of the Association of Persons (AOP) versus individual capacity.
4. Justification of the assessee's explanation for non-disclosure of income.

Detailed Analysis:

1. Legitimacy of Penalty under Section 271(1)(c):
The assessee challenged the penalty of ?8,82,000/- levied under section 271(1)(c) of the Income-tax Act, 1961, for concealing income. The Assessing Officer (AO) found that the assessee did not declare the sale of land in the original return and only disclosed it after the Department's detection. The AO concluded that the revised returns were filed out of time and the income was declared only after the concealment was detected. The CIT(A) upheld the penalty, noting that the assessee acted only after the Department's inquiries and failed to show due diligence in declaring the correct income. The Tribunal agreed with the lower authorities, emphasizing that the explanation offered by the assessee was improbable and the omission to declare the income was not a bonafide error.

2. Timeliness and Validity of Revised Returns:
The assessee initially filed a belated return under section 139(4) of the Act, which did not include the capital gain from the sale of land. Subsequent revised returns were filed during the scrutiny proceedings, which the AO refused to acknowledge as they were out of time. The Tribunal noted that the revised returns were null and void as they were filed beyond the permissible period, and thus the income remained undeclared in the valid return on record.

3. Assessment of Income in the Hands of AOP versus Individual Capacity:
The assessee argued that the income from the sale of land should be assessed in the hands of an AOP, not individually. The Tribunal examined this claim and found it unsubstantiated. The investments were made from individual sources, and the shares were definite and ascertainable. The other co-owners had already discharged their tax obligations individually, indicating that the arrangement was not a joint venture but rather individual transactions. The Tribunal concluded that the income was rightly assessed in the hands of the individual co-owners, including the assessee, and not the AOP.

4. Justification of the Assessee's Explanation:
The assessee claimed that the non-disclosure of income was due to reliance on a Chartered Accountant and personal circumstances involving his brother's health. The Tribunal found this explanation vague and unconvincing, given the sizeable amount involved and the fact that the income was only declared after detection by the Department. The Tribunal emphasized the taxpayer's duty to furnish true and correct particulars of income and found no reasonable cause for the omission. The Tribunal also noted that penalty proceedings are independent of assessment proceedings, and the assessee failed to justify his bonafides under Explanation 1 of section 271(1)(c).

Conclusion:
The Tribunal dismissed the appeal, upholding the penalty under section 271(1)(c) for concealment of income. The assessee's explanations were deemed improbable, and the omission to declare the income was not considered a bonafide error. The income was correctly assessed in the individual capacity of the assessee, and the revised returns filed out of time were invalid. The Tribunal found no error in the orders of the lower authorities in imposing the penalty.

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