Mrs. Alka P. Vala vs Ito
2003 Latest Caselaw 106 Bom

ORDER

I.P. Bansal, J.M.

Both appeals are filed by assessee and are directed against two separate orders of Commissioner (Appeals), dated 31-1-1995, for the assessment years 1987-88 and 1988-89.

2. Ground of appeal for both appeals is identical and reads as under "On the facts and circumstances of the case, the Commissioner (Appeals) has erred in not deleting entirely the penalty levied under section 271(1) (c) of the Income Tax Act, 1961"

2. Ground of appeal for both appeals is identical and reads as under "On the facts and circumstances of the case, the Commissioner (Appeals) has erred in not deleting entirely the penalty levied under section 271(1) (c) of the Income Tax Act, 1961"

3. Original assessments in respect, of both these years were completed under the provisions of section 143(1) on 24-11-1987, and 12-11-1990, for assessment years 1987-88 and 1988-89, respectively. As per the claim of assessee, the assessee had received following gifts during the years under consideration

3. Original assessments in respect, of both these years were completed under the provisions of section 143(1) on 24-11-1987, and 12-11-1990, for assessment years 1987-88 and 1988-89, respectively. As per the claim of assessee, the assessee had received following gifts during the years under consideration

Asst. yr. 1987-88

Asst. yr. 1987-88

Rs.

"Geeta Batra

21,000

Sarala Damani

21,000

RamIal Kocha

21,000"

Asst. yr. 1987-88

Asst. yr. 1987-88

Rs.

1. Chandrakala Agarwal

26,000

2. Gaurishankar Jalan

20,000

3. Dilip Kumar Agarwal

20,000

4. Bholanath Agarwal

20,000

5. Mahesh Agarwal

20,000

6. Shivraj Kundon

20,000

7. Kamlesh Agarwal

20,000

8. Premlata Agarwal

20,000

9. Shrigopal Agarwal

20,000

10. Pushpa Goel

20,000

11. Sarvanmal Agarwal

20,000

12. Deen Dayal Agarwal

20,000

13. Punkaj Kumar Agarwal

20,000

14. Santosh Kumar Agarwal

20,000

15. Rekha Agarwal

20,000

16. Bimla Devi Maroo

20,000,

17. Sangeeta Maroo

20,000

18. Chandrakala Shrimali

20,000

19. Mankars Sarwagi

20,000

20. Devendra Rustogi

20,000"

Almost all the donors were residents of Calcutta. Calcutta GTO, while examining the case of one of the donors, Smt. Chandrakala Agarwal, found that she did not disclose gift made to assessee in her return of income. In response to summons issued to Smt Chandrakala Agarwal, it was stated that she never made any gift to assessee. She also denied her signature. The assessing officer also enquired from Bank and came to know that some Shri Hansraj Bachawat gave signature for opening the account on behalf of Smt. Agarwal on 18-8-1966 and the account was closed on 21-1-1989. These facts were intimated by Calcutta assessing officer to the assessing officer having jurisdiction over assessee in the month of March, 1991. Upon receipt of such information, the assessing officer having jurisdiction upon assessee asked the assessee to furnish all the details in respect of gifts received by her during the years under consideration. In response, the assessee filed the full details of gifts along with a copy of affidavit. GT challan and a copy of assessing officer. Upon receipt of such information, the assessing officer issued summons under section 131 to all the donors.

4. For the gifts received in assessment year 1987-88, the summons returned unserved.

4. For the gifts received in assessment year 1987-88, the summons returned unserved.

5. In respect of assessment year 1988-89 as pointed out earlier Smt. Chandrakala Agarwal vide her letter denied to have given any gift to assessee and she stated that she does not know the assessee. Shri Gaurishankar Jalan also denied to have given any gift to assessee. He denied to know the assessee. His signature on the letter also differed from signature on affidavit filed by the assessee. Shri Dilip Agarwal also denied to have given any gift to assessee. The summons issued to the donors at Sr. Nos. 3 to 15 above at the addresses given by assessee returned un-served by postal authorities with the remark "not found, etc.

5. In respect of assessment year 1988-89 as pointed out earlier Smt. Chandrakala Agarwal vide her letter denied to have given any gift to assessee and she stated that she does not know the assessee. Shri Gaurishankar Jalan also denied to have given any gift to assessee. He denied to know the assessee. His signature on the letter also differed from signature on affidavit filed by the assessee. Shri Dilip Agarwal also denied to have given any gift to assessee. The summons issued to the donors at Sr. Nos. 3 to 15 above at the addresses given by assessee returned un-served by postal authorities with the remark "not found, etc.

6. Donors mentioned at Sr. Nos. 16 to 20, however, accepted that they have given gift to assessee but on verification of Bank pass book, it was noticed that these persons had deposited . equivalent amount of cash in their accounts immediately before the date of issue of cheque of gift.

6. Donors mentioned at Sr. Nos. 16 to 20, however, accepted that they have given gift to assessee but on verification of Bank pass book, it was noticed that these persons had deposited . equivalent amount of cash in their accounts immediately before the date of issue of cheque of gift.

7. In these circumstances, the assessments of the assessee were reopened by issue of notice under section 148. The assessee in response to issue of notice under section 148 filed the return in which the above mentioned. gifts were included as income of the assessee. In computation of income, a note was given that the assessee is declaring additional income in respect of gifts received by her as income under the head "other sources", the surrender is voluntary. During the course of inquiry under section 131 in October, 1991, and onwards, the details in respect of gifts were submitted. The donors are friends and relatives. Gifts were made long back. Out of love and affection these gifts were given. Inquiry made in this regard will put them into unnecessary embarrassment, as they will be required to disclose their other affairs, which they may not like others to know. A reference of hypertension and kidney problem was also given with which the assessee was suffering and it was mentioned that the offer is made to avoid further litigation and to buy peace and continue maintaining good relations with friends and relatives. Therefore, no penal provision should be attracted.

7. In these circumstances, the assessments of the assessee were reopened by issue of notice under section 148. The assessee in response to issue of notice under section 148 filed the return in which the above mentioned. gifts were included as income of the assessee. In computation of income, a note was given that the assessee is declaring additional income in respect of gifts received by her as income under the head "other sources", the surrender is voluntary. During the course of inquiry under section 131 in October, 1991, and onwards, the details in respect of gifts were submitted. The donors are friends and relatives. Gifts were made long back. Out of love and affection these gifts were given. Inquiry made in this regard will put them into unnecessary embarrassment, as they will be required to disclose their other affairs, which they may not like others to know. A reference of hypertension and kidney problem was also given with which the assessee was suffering and it was mentioned that the offer is made to avoid further litigation and to buy peace and continue maintaining good relations with friends and relatives. Therefore, no penal provision should be attracted.

8. The assessing officer while making assessment referred to the investigation made in regard to gifts received by assessee. The assessing officer turned down the plea of the assessee that the return offering income in respects of gifts was voluntary. The assessee filed the return only after inquiries were stated and almost after finalisation of the inquiry the return was filed in response to notice under section 148, The assessing officer also pointed out that at the inquiry stage the conclusion was drawn that assessee had not received any gift but managed to accumulated funds by manipulation. Thus, the assessments were reopened, therefore, the remark of the assessee that gifts were offered for taxation was voluntary is without any basis. The assessee is forced to do it and thus the assessee has concealed the particulars of income. Similarly, during the course of penalty proceedings reasoning advanced by the assessee was the same. Specific opportunity was granted to the assessee during the course of penalty proceedings, the assessee failed to file further evidence and also failed to provide present addresses of the donors. The assessing officer considered the submissions of the assessee and came to the conclusion that although the income has been accepted as per return, the assessee has concealed particulars of, income by showing her income by way of gift and tried to avoid tax payable on the same. Therefore, the assessing officer levied penalty at the rate of 200 per cent of the tax sought to be evaded. The assessee filed the appeal against the levy of penalty before the Commissioner (Appeals). Before the Commissioner (Appeals) similar submissions were reiterated. After considering the submissions, the Commissioner (Appeals) has disposed of the appeal of the assessee with the following observations as per his order for assessment year 1988-89 :

8. The assessing officer while making assessment referred to the investigation made in regard to gifts received by assessee. The assessing officer turned down the plea of the assessee that the return offering income in respects of gifts was voluntary. The assessee filed the return only after inquiries were stated and almost after finalisation of the inquiry the return was filed in response to notice under section 148, The assessing officer also pointed out that at the inquiry stage the conclusion was drawn that assessee had not received any gift but managed to accumulated funds by manipulation. Thus, the assessments were reopened, therefore, the remark of the assessee that gifts were offered for taxation was voluntary is without any basis. The assessee is forced to do it and thus the assessee has concealed the particulars of income. Similarly, during the course of penalty proceedings reasoning advanced by the assessee was the same. Specific opportunity was granted to the assessee during the course of penalty proceedings, the assessee failed to file further evidence and also failed to provide present addresses of the donors. The assessing officer considered the submissions of the assessee and came to the conclusion that although the income has been accepted as per return, the assessee has concealed particulars of, income by showing her income by way of gift and tried to avoid tax payable on the same. Therefore, the assessing officer levied penalty at the rate of 200 per cent of the tax sought to be evaded. The assessee filed the appeal against the levy of penalty before the Commissioner (Appeals). Before the Commissioner (Appeals) similar submissions were reiterated. After considering the submissions, the Commissioner (Appeals) has disposed of the appeal of the assessee with the following observations as per his order for assessment year 1988-89 :

"7 On a careful consideration of the submissions made on behalf of the appellant and also the observations of the assessing officer, I am of the view that the stand taken by the assessing officer that the appellant surrendered the gifts only when enquiries commenced by issue of summons under section 131, and filed revised return of income consequence to issue of notice under section 148 are well-founded. However, after taking the facts and circumstances of the case into consideration and particularly nothing the fact that this is mainly a case of rejection of explanation without the assessing officer having brought on record material to establish that these amounts represented the appellant's funds. I am of the view that the ends of justice would have been met if the penalty is restricted to the minimum leviable, i.e., 100 per cent of the tax sought to be evaded.

Similar decision was taken by Commissioner (Appeals) for assessment year 1987-88.

9. After narrating the abovementioned facts, the learned authorised representative contended that full particulars and details of gifts received were filed before assessing officer. The offer of additional income in respect of gifts made through return filed in response to notice under section 148 was voluntary, to buy peace and to avoid litigation. Therefore, he contended that no penalty should have been levied by assessing officer. The Commissioner (Appeals) was wrong in sustaining penalty to the extent of 100 per cent of tax sought to be evaded. He pointed out to the order of learned Commissioner (Appeals), wherein he has observed that the present case is mainly a case of rejection of explanation without the assessing officer having brought on record material to establish that these amounts represent appellant fund. In view of these observations, the learned Commissioner (Appeals) is wrong in holding that penalty is leviable to the extent of 100 per cent of the tax sought to be evaded. The learned authorised representative further placed reliance on the following decisions :

9. After narrating the abovementioned facts, the learned authorised representative contended that full particulars and details of gifts received were filed before assessing officer. The offer of additional income in respect of gifts made through return filed in response to notice under section 148 was voluntary, to buy peace and to avoid litigation. Therefore, he contended that no penalty should have been levied by assessing officer. The Commissioner (Appeals) was wrong in sustaining penalty to the extent of 100 per cent of tax sought to be evaded. He pointed out to the order of learned Commissioner (Appeals), wherein he has observed that the present case is mainly a case of rejection of explanation without the assessing officer having brought on record material to establish that these amounts represent appellant fund. In view of these observations, the learned Commissioner (Appeals) is wrong in holding that penalty is leviable to the extent of 100 per cent of the tax sought to be evaded. The learned authorised representative further placed reliance on the following decisions :

(i) CIT v. Kiran and Co. (1996) 217 ITR 326 (Bom)

(ii) CIT v. Baroda Tin Works (1998) 221 NR 661 (Guj)

(iii) CIT v. J V Appadurai Chettlar Co. (1996) 221 ITR 849 (Mad)

Referring to these decisions, the learned authorised representative contended that in view that the offer was voluntary and to buy peace of mind, no penalty should have been levied.

10. On the other hand, the learned departmental Representative contended that in pursuance of inquiry made by Calcutta Tax Officer, investigation was, started in respect of gifts received by assessee. During the course of investigation, it was found that the claim of the assessee that assessee had received certain gifts was incorrect. Summons were issued to all the donors. Some donors denied to have given any gift to the assessee, some donors were not available at the addresses given by the assessee and in some cases who confirmed to having given gift, in their Bank accounts equivalent cash was deposited immediately before issue of cheque. After detailed inquiry conducted in this regard, the assessments were reopened. As a result of inquiry the assessee was cornered and thus declared additional income in respect of gift. The offer of the assessee cannot be said to be voluntary. The assessee had concealed the particulars of her income. Therefore, penalty has rightly been held to be leviable by Commissioner (Appeals).

10. On the other hand, the learned departmental Representative contended that in pursuance of inquiry made by Calcutta Tax Officer, investigation was, started in respect of gifts received by assessee. During the course of investigation, it was found that the claim of the assessee that assessee had received certain gifts was incorrect. Summons were issued to all the donors. Some donors denied to have given any gift to the assessee, some donors were not available at the addresses given by the assessee and in some cases who confirmed to having given gift, in their Bank accounts equivalent cash was deposited immediately before issue of cheque. After detailed inquiry conducted in this regard, the assessments were reopened. As a result of inquiry the assessee was cornered and thus declared additional income in respect of gift. The offer of the assessee cannot be said to be voluntary. The assessee had concealed the particulars of her income. Therefore, penalty has rightly been held to be leviable by Commissioner (Appeals).

11. We have carefully considered the rival submissions in the light of material placed before us. It is the case of the assessee that the declared additional income in the return filed in response to notice under section 148 was voluntary and to buy peace and to avoid litigation. We find no merit in such claim of the assessee. The additional income declared in the return filed in response to notice under section 148 was after the detection by the revenue. A detailed inquiry was conducted. Summons were issued to all the donors. As pointed out earlier some of the donors have clearly denied to have given any gift to the assessee. Most of the donors were not available at the addresses given to receive the summons issued by assessing officer. In some cases were the donors have confirmed that they have made the gift, the cash was deposited in their Bank account immediately before issue of cheque to assessee. The result of this investigation was intimated to the assessee by assessing officer from time to time but no further action was taken by the assessee to counter those results. Even during the course of penalty proceedings opportunity was given to assessee to show that the gifts received were not her income. No further evidence was adduced. The law is well-settled that penalty proceedings are separate proceedings and assessee can adduce further evidence to show that what has been assessed is not the real income of the assessee.

11. We have carefully considered the rival submissions in the light of material placed before us. It is the case of the assessee that the declared additional income in the return filed in response to notice under section 148 was voluntary and to buy peace and to avoid litigation. We find no merit in such claim of the assessee. The additional income declared in the return filed in response to notice under section 148 was after the detection by the revenue. A detailed inquiry was conducted. Summons were issued to all the donors. As pointed out earlier some of the donors have clearly denied to have given any gift to the assessee. Most of the donors were not available at the addresses given to receive the summons issued by assessing officer. In some cases were the donors have confirmed that they have made the gift, the cash was deposited in their Bank account immediately before issue of cheque to assessee. The result of this investigation was intimated to the assessee by assessing officer from time to time but no further action was taken by the assessee to counter those results. Even during the course of penalty proceedings opportunity was given to assessee to show that the gifts received were not her income. No further evidence was adduced. The law is well-settled that penalty proceedings are separate proceedings and assessee can adduce further evidence to show that what has been assessed is not the real income of the assessee.

12. Now, coming to the case law relied upon by the learned authorised representative of the assessee, we find that none of the case law relied is applicable to the facts of the present case.

12. Now, coming to the case law relied upon by the learned authorised representative of the assessee, we find that none of the case law relied is applicable to the facts of the present case.

13. In the case of CIT v. Kiran & Co. (supra), it was specifically found that apart from the letter of the assessee dated 5-3-1986, there was no other material whatsoever before the authorities on the basis of which it could be held that the assessee had concealed income during the year under consideration. In the present case, the assessing officer has brought material on record to show that the claim of the assessee in respect of gift received was false and incorrect. Thus, ratio of this decision is not applicable.

13. In the case of CIT v. Kiran & Co. (supra), it was specifically found that apart from the letter of the assessee dated 5-3-1986, there was no other material whatsoever before the authorities on the basis of which it could be held that the assessee had concealed income during the year under consideration. In the present case, the assessing officer has brought material on record to show that the claim of the assessee in respect of gift received was false and incorrect. Thus, ratio of this decision is not applicable.

14. In the case of CIT v. Baroda Tin Works (supra), case related to assessment year 1971-72 and in the said case it has been pointed out that Explanation to section 271(1) (c) inserted with effect from I-4-1976, could not be applied as the same does not have retrospective effect. We are dealing with the case of assessment years 1987-88 and 1988-89, therefore, the ratio of said decision cannot be applied to the present case.

14. In the case of CIT v. Baroda Tin Works (supra), case related to assessment year 1971-72 and in the said case it has been pointed out that Explanation to section 271(1) (c) inserted with effect from I-4-1976, could not be applied as the same does not have retrospective effect. We are dealing with the case of assessment years 1987-88 and 1988-89, therefore, the ratio of said decision cannot be applied to the present case.

15. The ratio of decision in the case of CIT v. JV Appadurai Chettlar Co. (supra) also cannot be applied as in the said case the revised return was filed before completion of assessment. In the present case, the return was filed in response to notice under section 148 and that too after detailed inquiry made by assessing officer in regard to gifts received. Thus, the offer of additional income in the present case was made after detection by the revenue.

15. The ratio of decision in the case of CIT v. JV Appadurai Chettlar Co. (supra) also cannot be applied as in the said case the revised return was filed before completion of assessment. In the present case, the return was filed in response to notice under section 148 and that too after detailed inquiry made by assessing officer in regard to gifts received. Thus, the offer of additional income in the present case was made after detection by the revenue.

16. Considering the facts and circumstances of the present case discussed in detailed in above part of decision, we are of the opinion that assessee had concealed particulars of her income, therefore, liable for penalty under section 271(1) (c). The Commissioner (Appeals) was justified in upholding the penalty to the extent of 100 per cent of the tax sought to be evaded in which no interference is called for from our side. The appeals filed by the assessee are, therefore, dismissed.

16. Considering the facts and circumstances of the present case discussed in detailed in above part of decision, we are of the opinion that assessee had concealed particulars of her income, therefore, liable for penalty under section 271(1) (c). The Commissioner (Appeals) was justified in upholding the penalty to the extent of 100 per cent of the tax sought to be evaded in which no interference is called for from our side. The appeals filed by the assessee are, therefore, dismissed.