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TMI Blog2017 (11) TMI 1426X X X X Extracts X X X X X X X X Extracts X X X X ..... the AAC and the addition was accepted by the assessee. In view of these facts, penalty of Rs. 6,46,588/- was levied under section 271(1)(c) of the Act. 2. The Commissioner of Income Tax (Appeals) cancelled this penalty on the ground that since the assessee had shown the balance income in his return for assessment year 1978-79 which was filed on 20th January, 1979, there was no concealment. However, on further appeal, the Tribunal restored the penalty. 3. The Tribunal assigned reasons and for restoring the penalty. The Tribunal held that non-availability of the agreement does not mean that the nature of the transaction cannot be disclosed. If the assessee had declared a loss, he thwarted his tax liability for two years by not declaring the entire receipts in the assessment year 1977-78. The tribunal recorded a finding that even after the set-off of brought forward losses, the current year's loss would have been converted into positive income with the inclusion of the balance receipt of the minimum guarantee amount. By declaring the balance amount in the subsequent year, the assessee certainly furnished inaccurate particulars of income for the year under appeal and either avoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act, it is held so by the Commissioner of Income Tax (Appeals). He had rightly come to the conclusion that what was shown as deposit from M/s. Prakash Pictures was shown as income in the return for assessment year 1978-79 filed on 20th January, 1979. The re-opening of the assessment for the present year is on the basis of an audit objection dated 9th July, 1981. The assessee had a sizable carried forward loss as already assessed so that whichever way the assessee viewed this issue, there would be a negative income to be returned. The assessee, therefore, did not benefit in any manner by showing a part of this income as the income of the next year. This was declared by the assessee before any detection of the omission. The Commissioner of Income Tax (Appeals) also found from the record that the order was passed under section 264 for assessment year 1978-79, in which the income originally assessed on the basis of the earlier return of the assessee has been reduced by the same amount by which the income to this assessment year has been increased and treated as concealed income. 8. Ms. Sathe would invite our attention to pages 14 and 15 of this paper book to submit that there was at b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961 to submit that there is no liberty to manipulate but there is a positive obligation to disclose all particulars. 12. Mr. Chhotaray relies upon the following judgments and decisions in support of his arguments:- (i) Union of India vs. Dharmendra Textiles Processors and Ors., (2008) 306 ITR 277; (ii) Commissioner of Income Tax vs. Zoom Communication P. Ltd., (2010) 327 ITR 510; (iii) Mak Data P. Ltd. vs. Commissioner of Income Tax-II, Judgment in Civil Appeal No. 9772 of 2013, decided on 30th October, 2013 (Supreme Court). 13. For appreciating these contentions, one must peruse the order of the Assessing Officer. The Assessing Officer passed an order on 8th March, 1990. He held that though the assessee maintains that he has not concealed any particulars, but it is evident that there was increase in the income. The assessee pointed out that during the year, the income from one of the distributors was treated as advance. In the revised return, in response to notice under section 148, the income was shown on minimum guarantee basis and the mistake in the earlier year occurred due to non-availability of agreement. The distributor had claimed the same as minimum guaran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall pay by way of penalty,- (i) in the cases referred to in clause (a); (a) in the case of a person referred to in sub-section (4A) of section 139, where the total income in respect of which he is assessable as a representative assessee does not exceed the maximum amount which is not chargeable to income-tax, a sum not exceeding one per cent of the total income computed under this act without giving effect to the provisions of sections 11 and 12, for each year or part thereof during which the default continued; (b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal to two percent of the assessed tax for every month during which the default continued. Explanation. - In this clause, "assessed tax" means tax as reduced by the sum, if any, deducted at source under Chapter XVIIB or paid in advance under Chapter XVIIC; (ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum which shall not be less than ten per cent but which would have been avoided if the income returned by such person had been accepted as the correct income; (iii) in the cases referred to in clause (c) in addition to any tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the amount represented by such receipt, deposit or outgoing or value of such investment (such amount or value hereafter in this Explanation referred to as the utilised amount) shall be treated as the income of the assessee, particulars of which had been concealed or inaccurate particulars of which had been furnished for the first preceding year; and where the amount so added or deducted in the first preceding year is not sufficient to cover the utilised amount, that part of the amount so added or deducted in the year immediately preceding the first preceding year which is sufficient to cover such part of the utilised amount as is not so covered shall be treated to be the income of the assessee, particulars of which had been concealed or inaccurate particulars of which had been furnished for the year immediately preceding the first preceding year and so on, until the entire utilised amount is covered by the amounts so added or deducted in such earlier assessment years. Explanation 3 : Where any person who has not previously been assessed under the Indian Income-tax Act, 1922 (11 of 1922) or under this Act fails, without reasonable cause, to furnish within the period specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that firm if that firm were an unregistered firm. (3) Notwithstanding anything contained in this section, - (a) no penalty for failure to furnish the return of his total income under sub-section (1) of section 139 shall be imposed under sub-section (1) on an assessee whose total income does not exceed the maximum amount not chargeable to tax in his case by one thousand five hundred rupees; (b) where a person has failed to comply with a notice under sub-section (2) of section 139 or section 148 and proves that he has no income liable to tax, the penalty imposable under section (1) shall not exceed twenty-five rupees; (c) no penalty shall be imposed under sub-section (1) upon any person assessable under clause (i) of subsection (1) of section 160, read with section 161, as the agent of a non-resident for failure to furnish the return under sub-section (1) of section 139: Provided that nothing contained in clause (a) or clause (b) shall apply to a case referred to in sub-clause (a) of clause (i) of sub-section (1). (4) If the assessing Officer or the Appellate Assistant Commissioner, or the Commissioner (Appeals) in the course of any proceedings under this Act, is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. Explanation 2. - Where the source of any receipt, deposit, outgoing or investment in any assessment year is claimed by any person to be an amount which had been added in computing the income or deducted in computing the loss in the assessment of such person for any earlier assessment year or years but in respect of which no penalty under clause (iii) of this sub-section had been levied, that part of the amount so added or deducted in such earlier assessment year immediately preceding the year in which the receipt, deposit, outgoing or investment appears (such earlier assessment year hereafter in this Explanation referred to as the first preceding year) which is sufficient to cover the amount represented by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of income in respect of which particulars have been concealed or inaccurate particulars have been furnished; C = amount of tax on the total income assessed as per the provisions contained in section 115JB or section 115JC; D = amount of tax that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished: Provided that where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished on any issue is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D: Provided further that in a case where the provisions contained in section 115JB or section 115JC are not applicable, the item (C-D) in the formula shall be ignored; (b) where in any case the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search, makes a statement under sub-section (4) of section 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in subsection (1) of section 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income. Explanation 5A. - Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of - (i) any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year; or (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c). (2) When the person liable to penalty is a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, then notwithstanding anything contained in the other provision of this act, the penalty imposable under sub-section (1) shall be the same amount as would be imposable on that firm if that firm were an unregistered firm. (3) ***** (4) If the Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that the profits of a registered firm have been distributed otherwise than in accordance with the shares of the partners as shown in the instrument of partnership on the basis of which the firm has been registered under this Act, and that any partner has thereby returned his income below its real amount, he may direct that such partner shall, in addition to the tax, if any, payable by him, pay by way of penalty a sum not exceeding one and a half times the amount of tax which has been avoided, or would have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the first appellate authority was carried away by the fact that the sum of Rs. 13,70,000 was split in two parts, namely, Rs. 3,90,917/- and Rs. 9,79,083/- respectively shown as minimum guarantee receipt and as advance from the distributor. However, the explanation of the asessee was that there is no concealment and at the time the accounts were framed, the assessee did not have the agreement between the parties so that it was not clear as to what was the minimum guarantee commission and what was the advance. Thus, this was a technical error. This argument somehow found favour with the Commissioner as is apparent from his reasoning from para 1.2 at pages 14-15 of the order. 16. The Tribunal rightly came to the conclusion that it was immaterial as to whether the agreement was available or otherwise. However, it is not possible that the agreement in writing was not available. Even if formal written agreement was not available, it certainly would have been on the basis of some prior negotiations. The assessee and M/s. Prakash Pictures are both in film making and distributing business. Hence, they ought to have known the nature of transaction despite non-availability of the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of Rs. 6,46,588/- cancelled by the CIT(A)." 17. We are, therefore, of the opinion that none of the decisions relied upon by Ms. Sathe are of any assistance. 18. In the case of the Commissioner of Income-Tax vs. Manilal Tarachand (2002) 254 ITR 630, the Gujarat High Court was dealing with a case where the amount received by the assessee had been returned by the assessee in his return of income for the assessment year 1975-76. The Income Tax Officer initiated re-assessment proceedings based on this disclosure made by the assessee for assessment year 1975-76. The Commissioner of Income Tax initiated proceedings under section 263 of the Act stating that the assessment order framed on 8th March, 1985 under section 143(3) read with section 147 of the Income Tax Act, 1961 was erroneous insofar as it was prejudicial to the interest of the Revenue as the Income Tax Officer had failed to mention the point regarding initiation of penalty proceedings under section 271(1) (c) on account of concealment of income or furnishing inaccurate particulars of income. The assessee resisted the notice for revision on two fold count. Firstly, it was contended that the provisions of section 263 did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been imposed and to that extent, the Commissioner came to the conclusion that section 263 of the Income Tax Act, 1961 confer in him enough powers to direct the initiation of penalty proceedings. It is that peculiar aspect of the matter which led to the High Court holding that there was on facts also no penalty leviable for this was not a case where the assessee concealed the income or furnished inaccurate particulars thereof. We do not think that this decision is of any assistance. 20. In the case of Commissioner of Income Tax vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158, the Hon'ble Supreme Court came to the conclusion that the assessee must have furnished inaccurate particulars of income. The word "particulars" used in section 271(1)(c) would embrace the details of the claim made. When no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. It is in that context that the Hon'ble Supreme Court came to the conclusion that there ought to be a finding that no details were supplied by the assessee in his returns. When there is no finding that any details supplied by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its return under protest on 16th February, 2004 and also requested for the grounds for re-opening the assessment. Since after the reasons were communicated, the assessee realised that he has committed a mistake and addressed a letter to the Assessing Officer stating that there was no willful suppression of facts by the assessee but that a genuine mistake or omission had been committed, which also appears to have been overlooked by the Assessing Officer before whom the tax audit report was placed. Accordingly, the assessee filed a revised return on the same day. The re-assessment was passed on the same day and the assessee then paid the tax due as well as the interest thereon. It is, therefore, the Hon'ble Supreme Court termed these as unfortunate circumstances in which the penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 were initiated against the assessee. The penalty was determined, against which an appeal was filed, which also has been rejected. The Tribunal also upheld the imposition of penalty. Significantly, the Tribunal mentioned that the assessee had made a mistake which could be described as a silly mistake, since the assessee is a high-caliber a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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