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TMI Blog2016 (1) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee in the present case is an individual. There was search and seizure operation carried out by Central Excise Department and Income Tax Department on dated 31.05.2005 and 28.11.2006 and assessment years covered under the search were from AYs 2001-02 to 2007-08 respectively. As a result of search, assessee went before the Settlement Commission of Income Tax (ITSC in short) and offered additional income for tax for an amount of Rs. 37.75 crores only. However the income was finally settled for an amount of Rs. 105 crores vide order dated 28.03.2008 under section 245D(4) of the Act. The relevant portion of the ITSC is reproduced below:- "5. The undisclosed income is settled as per following table: Sl. No. Name of the applicant Additional income offered in the SOF (Rs) Further additional income disclosed during 245D(1) proceedings (Rs) Further additional income disclosed during 245D(4) proceedings (Rs) Total additional income offered before I.T.S.C. (Rs) 1 SRI LOKNATH PRASAD GUPTA 37,75,00,000 67,25,00,000 1,05,00,00,000 6. The CIT/AO may take such action as appropriate in respect of the matters not placed before the Commission by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wishers as custodian. The assessee paid the additional wealth tax for an amount of Rs. 15,65,900/- @ 1% of the amount shown as receivable i.e. Rs. 15,65,90,000/-. Accordingly the wealth tax was assessed on Rs. 17,79,78,300/- (2,28,88,300.00+15,65,90,000.00- 15,00,000.00). The penalty proceedings were initiated and the assessee argued that the additional tax paid for considering "Receivable" as "cash-inhand" voluntarily and intimated to the Department before the issue of notice u/s. 17 of the Act. The entire amount of "Receivable" of Rs. 15,65,90,000/- appeared in the balance sheet as on 31.03.2007 is now offered as cash in hand and the source pertains to the disclosure for AYs 2001-02 to 2007-08 (break up as per settlement application) of Rs. 105 crores before I.T.S.C. Kolkata. It is argued that "Receivable" is recorded in the balance filed with the Department before income tax scrutiny proceedings for A.Y 2009-10. Simply, the nomenclature changed from "Receivable" to "cash-in-hand" with custodians does not amount the concealment of wealth. However the WTO has disregarded the claim of the assessee and confirmed penalty @ 200% of the tax sought to be evaded amounting to Rs. 35,89,56 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bles admitted as being Cash in Hand, and for which I have Confirmed. The basic exemption limit of Rs. 15,00,000/- is to be granted. The taxable net wealth comes to Rs. [15,65,90,000 (-) 15,00,000] = 15,50,90,000/-. The tax thereon @ 1%= Rs. 15,50,900/-. This is the tax sought to be evaded. Thus, Penalty quantum to this extent at Rs. 15,50,900/- is hereby Confirmed. Aggrieved by the order of ld. CWT(A), the assessee preferred second appeal before us on the following grounds of appeal:- "1. That the Ld. CIT(A) erred in confirming penalty to the tune of Rs. 15,50,900/- @ 100% of the tax on net taxable wealth under sec. 18(1)(c) of the Wealth Tax Act, 1957. The assessee, in the course of the assessment to regularize the wealth escaped assessment. Based on the petition of the assessee, notice u/s. 17 of the Act was issued and ultimately assessment was made u/s. 17/16((3) of the Act accepting the revised return. Hence, the levy of penalty 18(1)(c) of the Act on the wealth suo moto offered to tax by the assessee is unjustified and need to be deleted." Shri Amit Kumar, Ld. Authorized Representative appearing on behalf of assessee and Shri Uday Kr. Saerkar, Ld. Departmental Representa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the balance sheet of the assessee for the assessment year 2007-08 was factually cash in hand which was not offered to wealth tax. But the assessee immediately worked out the wealth and paid the tax thereon and informed to the WTO. However the WTO initiated penalty in the assessment order and confirmed the same. Before us the ld. AR pleaded that for the first time the assessee failed to file the return on wealth tax because he was not aware and no consultant guided for the same. For the additional disclosure the ld. AR submitted that the assessee failed to pay the wealth tax on the receivable as he was under the impression that it is not cash in hand. However we find that on both the occasion the assessee failed to disclose his true wealth until & unless the notices were issued. The plea of the ld. AR that the assessee is not aware about the taxation laws does not hold any merit. The assessee is running a good business in the brand name of 'Raja Group' and paying huge taxes. Therefore on merit we find that the assessee has defaulted in the payment of wealth tax. However we find from the order of the AO that the penalty has just been initiated without recording the reason whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard pro forma without striking of the relevant clauses will lead to an inference as to non-application of mind." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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