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TMI Blog2025 (2) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry in the capital account copy also, in the peculiar facts of the present case, does not amount to disclosure of the primary facts.
Even if the disclosure issue is kept aside, the penalty was still liable to be imposed upon the Appellant for having adopted such a device or subterfuge to evade taxes. The primary facts about which there is no dispute, are sufficient to sustain the findings regarding the Appellant adopting a device or subterfuge to evade the taxes. These are also good enough grounds to sustain the minimum penalty imposed upon the Appellant.
If Explanation 1 to Section 147 was not strictly speaking applicable, still, Explanation 1 to Section 271 could not have been ignored. This was a case where the Explanation offered by the Appellant was found to be patently false. In any event, the Appellant failed to substantiate or demonstrate that such Explanation was bona fide. As noted earlier, the addition to the Appellant's income has already attained finality. Based on these factors, the minimum penalty imposed upon the Appellant warrants no interference. Decided against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... and/or requirement in return obliging the Appellant to disclose any withdrawals from its capital account specifically, no penalty could have been levied on the Appellant for concealing income or furnishing inaccurate particulars. She submitted that such an approach was contrary to the law laid down in CIT vs. Smt. P.K.Kochammu Amma (SC) 125 ITR 624, Muthiah Chettiar 74 ITR 183 and CIT vs Sohan Lal 143 ITR 901. 7. Ms. Vissanji submitted that the ITAT erred in styling the transaction of the Appellant entering a partnership firm under the name and style of M/s Nirmal Enterprises, contributing stock-in-trade (Agripada Plot) valued at Rs. 1,04,53,500/- to the firm's account and withdrawing the amounts from its capital account to pay of its liability as a "device" to evade tax. She submitted that this transaction was no different from that in the case of Jamnalal and Sons Ltd vs Commissioner of Income-tax, Nagpur (2017) 77 taxmann.com 350 (Bombay). She submitted that the coordinate bench of this Court, on similar facts, held that the assessee entering into a partnership and making a contribution by valuing the plots could not be regarded as some colourable device to evade tax. She sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Act of 1956, was involved in the real estate and construction business. In 1982, it purchased a plot of land at Agripada for a consideration of Rs.25,00,000/-. It claimed having spent an amount of Rs. 26,61,283/- towards development and construction on the said plot. 18. On 19 September 1983, the Appellant and six others entered into a partnership under the name and style of M/s Nirmal Enterprises. Less than a year after purchasing the said plot for Rs. 25,00,000/--and expending an additional amount of approximately Rs. 26,00,000/--towards construction and development thereon, the Appellant revalued this plot at Rs. 1,04,53,500/--and introduced the same into the partnership firm as its capital. 19. The Appellant filed a return of income for the Assessment Year 1984-85 on 20 September 1994, declaring "Nil" income. The Appellant computed its income for the year before deducting brought forward losses of the earlier Assessment years at Rs. 33,89,467/-. From this, the Appellant deducted an amount of Rs. 33,89,467/- which it claimed to be "brought forward unabsorbed losses of earlier years". On this basis, a Nil total income was disclosed in the return of income for the Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fall within the ratio of Sunil Siddharthbhai (supra). 26. The Assessing Officer rejected the Appellant's case and imposed the minimum prescribed penalty of Rs. 33,34,096/-. The Appellant appealed to the Commissioner of Income Tax (Appeals), which allowed the Appeal. Therefore, the Revenue appealed to the ITAT, which, by the impugned order dated 30 October 2001, set aside the order of the Commissioner of Income Tax (Appeals) and restored the penalty of Rs. 33,34,096/--imposed by the Assessing Officer. 27. Hence, this Appeal under Section 260A of the IT Act on the above-referred substantial questions of law. 28. As noted above, the issue of the addition of Rs. 52,92,218/- to the Appellant's income has attained finality. The Assessing Officer and the ITAT, in their fairly detailed orders, have returned categorical findings to the following effect:- (a) During the two years since the constitution of the firm M/s Nirmal Enterprises, the work in progress had increased from Rs. 1,04,53,500/- (initial contribution of the Appellant) to Rs. 1,38,47,107/-; (b) At the same time, the Appellant had drawn out a major portion of its contribution/investment in the firm. The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatsoever in analysing and evaluating the material on record. The contentions now raised by Ms Vissanji before us have been duly considered by the ITAT, and we are not persuaded to take any different view. 32. Since the factual findings have attained finality, the issue is only about drawing inferences from such facts. From the factual findings, we are satisfied that the very constitution of the firm and the transaction of the Appellant inflating the value of the plot of land and contributing it to the stock in trade, followed by withdrawals within a short period, amounted to a device or subterfuge or conduit to facilitate tax evasion. For these reasons, the Assessing Officer was justified in imposing the minimum prescribed penalty, and there is no warrant to interfere with the same. 33. The circumstance that the assessee had filed the capital account copy along with the returns does not amount to true or full disclosure in the present case. The entry in the capital account copy also, in the peculiar facts of the present case, does not amount to disclosure of the primary facts. The facts in Culcutta Discount Co. Ltd (supra), Ananta Landmark Pvt Ltd (supra) and Mangalam Publicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 260A was not entitled to upset findings of fact unless perversity was demonstrated. Despite the notice, there was no appearance on behalf of the Revenue. Though this factor may not be relevant, what is relevant is that the Coordinate Bench, based on the material on record, found that there was no perversity in the concurrent findings of fact recorded by Commissioner of Income Tax (Appeals) and the ITAT. Therefore, based on Jamnalal Sons Ltd (supra), no case is made to interfere with the IATT's well-reasoned order. 38. The contentions based on P K Kochammu Amma (supra), Muthiah Chettiar (supra) or Sohan Lal (supra) also do not commend to us. As noted earlier, the mere filling of a capital account does not amount to full and proper disclosures in the present case. In any event, a penalty can be sustained on the finding that the Appellant had created a subterfuge to evade taxes legitimately due and payable by it. This is not a case where two views were reasonably possible, and therefore, the principle in Durga Kamal Rice Mills (supra) is not applicable. This is also not a case where a mere rejection of the Appellant's claim is the prime cause for imposing a penalty. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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