Shri Babu.C. Geroge Chandrathil v. Commissioner of Income Tax, Ernakulam

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **THURSDAY ,THE 06TH DAY OF SEPTEMBER 2018 / 15TH BHADRA, 1940** **ITA.No. 222 of 2013** **AGAINST THE ORDER/JUDGMENT IN ITA 498/2011 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 28-02-2013** ## **APPELLANT/S:** **SHRI BABU.C. GEROGE CHANDRATHIL HOUSE, BCG BUNGLOW ANNEX, VILLA A H.NO.33/2030-D, AMBEDKAR ROAD, VENNALA P.O., ERNAKULAM-682 028.** **BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SMT.PREETHA S.NAIR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.P.GOPINATH** ## **RESPONDENT/S:** **COMMISSIONER OF INCOME TAX IS PRESS ROAD, ERNAKULAM, KOCHI-682 018.** **BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH SC FOR INCOME TAX** ## **OTHER PRESENT:** **THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 06.09.2018, ALONG WITH ITA.224/2013, ITA.223/2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** _ITA 223, 223 & 224 of 2013_ 2 ------------------------------------------- I.T.A.Nos. 222, 223 & 224 of 2013 ------------------------------------------- Dated this the 6[th] day of September, 2018 ## **J U D G M E N T** ## Ashok Menon, J. The main questions of law arising for consideration in the three appeals are as follows:- - _“i. Whether on the facts and circumstances of the case the appellate tribunal was justified in partly sustaining the order of the appellate authority ?_ - _ii. Whether on the facts and circumstances of the case the appellate tribunal was justified in not waiving the penalty in full when it had accepted the fact that the additional income was offered by the appellant voluntarily and it cannot be considered as a concealed income under Section 271(1)(c) of the Income Tax Act ?_ - _iii.Whether on the facts and circumstances of the case the appellate tribunal was justified in sustaining the order of the appellate authority to the extent of 100% of the penalty when it has been accepted by it that the additional income was offered voluntarily by the appellant and it cannot be considered as concealed income under Section 271(1)(c) of the Income Tax Act ?”_ 2. The assessee, an NRI businessman, is aggrieved by the common order passed by the Income Tax Appellate 3 _ITA 223, 223 & 224 of 2013_ Tribunal, Cochin Bench relating to three assessment years, from 2001-02 to 2003-04. The penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by the Assessing Officer (A.O.) was affirmed by the Commissioner of Income Tax (Appeals). However, the quantum of penalty, which was directed to be paid at 200% of the tax on income concealed, vide Annexure B order, was restricted to 100% by the Tribunal and the appeals were thus allowed in part. 3. The facts in brief are that a search and seizure was carried out at the residence and office premises of the assessee on 06.08.2003 and concealment of income for the three years was detected. In response to a notice under Section 153A, in ITA No.222/2013 the assessee filed a return declaring an income of Rs.14,50,200/and an agricultural income of Rs.4,14,000/- for the assessment year 2001-02. The assessment was competed on 07.03.2006 by adding Rs.5,75,035/- as the undisclosed business income and Rs.90,000/- by bringing the clubbing provisions under Section 64(1)(iv) of the Act. The appellant has paid the _ITA 223, 223 & 224 of 2013_ 4 amount in full. The addition was made by the A.O. on the basis of the consideration disclosed from the sale deeds of land purchase at Nedumbassery, seized at the time of search, which according to the A.O. was showing an amount less than the amount shown in the agreement for sale. That apart, the A.O. has also made an addition of Rs.90,000/-, pertaining to rent received by the appellant's wife on the ground that the building was owned by the appellant, though the rent was received by the appellant's wife. 4. I.T.A.No.223/2013 pertains to the assessment year 2002-03. In response to notice under Section 153A, the appellant had filed a return declaring an income of Rs.7,32,020/- and an agricultural income of Rs.5,27,000/and the assessment was completed on 07.03.2006. The A.O. made an addition of Rs.84,000/-, being rent received by appellant's wife vide assessment order at Annexure B. 5. I.T.A.No.224/2013 pertains to the assessment year 2003-04. In response to the notice under Section 153A, the appellant had filed a return declaring income of Rs.31,41,390/- and an agricultural income of Rs.4,75,400/-. The A.O. made an addition of _ITA 223, 223 & 224 of 2013_ 5 Rs.1,05,000/-, which was the rent received by appellant's wife, vide assessment order at Annexure B. 6. The appellant's contention is that the Assessing Authority and the appellate forum failed to notice the fact that pursuant to the notice under Section 153A of the Act, the appellant has _suo motu_ declared additional amount as income and offered the same for assessment. The additional income was not on the basis of any materials seized by the Department. The Tribunal ought to have found that the return filed pursuant to the notice should be treated as return filed under Section 139. There was no concealment or furnishing of inaccurate particulars by the appellant in the return so as to attract the penal provision under Section 271(1)(c) of the Act and hence the appellant seeks interference of this Court. 7. The learned Senior Standing Counsel, Government of India (Taxes) submits that it is consequent to a search and seizure under Section 132 of the Act on 06.08.2003 that the concealment of income was revealed. Consequent to that, notice under Section 153A of the Act was issued for the years under consideration. The 6 _ITA 223, 223 & 224 of 2013_ learned Senior Counsel points to the fact that the assessee did not file any returns for the years under consideration prior to the date of search and that he had filed the returns for the first time only after receiving the notice under Section 153A of the Act, which by itself would make the assessee liable to penalty. 8. The learned Counsel for the assessee relies on the decision reported in _**Commissioner of Income Tax v. Reliance Petroproducts Pvt.Ltd., [2010] 322 ITR 158 (SC)**_ in support of his argument that there has been no concealment so as to attract the provisions under Section 271(1)(c) of the Act. The Hon'ble Supreme Court referred to an earlier decision _**Dilip N. Shroff v. Joint CIT [2007] 6 SCC 329**_ and held thus in paragraphs 9, 10 and 11 of the judgment; extracted below:- _“9. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff v. Joint CIT [2007] 6 SCC 329, this court explained the terms “concealment of income” and “furnishing inaccurate particulars”. The court went on to hold therein that in order to attract the penalty_ _ITA 223, 223 & 224 of 2013_ 7 _under section 271(1)(c), mens rea was necessary, as according to the court, the word “inaccurate” signified a deliberate act or omission on behalf of the assessee. It went on to hold that clause (iii) of section 271(1)(c) provided for a discretionary jurisdiction upon the assessing authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term “inaccurate particulars” was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. xx xx_ _10. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word “inaccurate” has been defined as: “not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript.”_ _11. We have already seen the meaning of the word “particulars” in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.”_ _ITA 223, 223 & 224 of 2013_ 8 9. Admittedly there was unexplained income as discernible from the records maintained by the assessee revealed on search and subjected to seizure. Admittedly, there was no explanation offered by the assessee as to the non-filing of the income tax return. Under such circumstances, we are of the opinion that the returns filed subsequent to the search would not absolve the penal provisions under Section 271(1)(c) of the Act. ## 10. In _**Commissioner of Income Tax v. N.Jayaprakash,**_ _**[2018] 400 ITR 99 (Ker.),**_ a Division Bench of this Court has held thus:- _“If the concealment or furnishing of inaccurate particulars of income is an act committed by the assessee at the time of filing the return, the liability of the assessee or the culpability of the assessee is his conduct at the time when he filed the return.”_ 11. In view of the decisions cited above, we are of the opinion that failure on the part of the assessee to file the returns voluntarily, as statutorily prescribed, would be a culpable act or omission attracting penalty under Section 271(1)(c) of the Act. It was only subsequent to the search that the assessee filed returns and this reveals the intention of the assessee to avoid _ITA 223, 223 & 224 of 2013_ 9 payment of tax; if the search had not been taken out. There is also clear evidence of attempt to evade payment of tax on rental income, which is received by his wife for property belonging to him. The fact regarding the sale of the property in variance with the consideration mentioned in the agreement is also evidence of intention to evade payment of tax. 12. The penalty originally levied was 200%, which was reduced to 100% by the Appellate Tribunal. We find no reason, whatsoever, to interfere with that finding of the Appellate Tribunal and the questions of law are answered in favour of the Revenue and against the assessee. The I.T.Appeals would stand dismissed. No order as to costs. ## **Sd/-** ## **K.VINOD CHANDRAN** ## **JUDGE** ## **Sd/-** ## **ASHOK MENON** **JUDGE** _ITA 223, 223 & 224 of 2013_ 10 ## APPENDIX APPELLANT(S)' ANNEXURES : ANNEXURE A : COPY OF THE ASSESSMENT ORDER FOR 2001-02 ISSUED BY THE INCOME TAX DEPARTMENT TO THE APPELLANT DATED 07.03.2006. ANNEXURE B : COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 08.06.2006 ISSUED TO THE APPELLANT. ANNEXURE C : COPY OF THE ORDER ISSUED BY THE ITAT DATED 26.12.2007 TO THE APPELLANT. ANNEXURE D : COPY OF THE PENALTY ORDER DATED 31.03.2008 ISSUED BY THE ASSISTANT DIRECTOR OF INCOME TAX (INTERNAL TAXATION) TO THE APPELLANT. ANNEXURE E : COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 31.03.2011 TO THE APPELLANT. ANNEXURE F : COPY OF THE TRIBUNAL ORDER DATED 28.02.2013 ISSUED TO THE APPELLANT.