By TIOL News Service

CHENNAI, JUNE 16, 2018: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether if the assessee fails to return the advances received but puts the same in the balance sheet annexed to the return on bona fide belief that such advances are not income earned, it is to be construed as a wilful concealment. NO IS THE VERDICT.

Facts of the case:

The assessee, a cine artist and model by profession, filed her return declaring income of Rs.89,69,894/- which was subsequently revised to Rs.4,41,40,950/-. This difference between the original and revised income was the advance received by her from various cinema producers towards the work to be done by her. Thereafter, during course of assessment, the AO noted that the assessee had incurred expenses towards (a) Audit fees, (b) Commission & brokerage, (c) Professional charges and (d) security charges, for which TDS was claimed to have been made, but no proof of remittance of the same into the Government account was produced. On this ground, the AO disallowed such expenses and added it to assessee's total income u/s 40(a)(ia). These disallowances and failure to show advances, culminated into penalty proceedings, by imposing a penalty of Rs.1,16,11,020/- u/s 271(1)(c), which according to AO was concealed income.

On appeal, the FAA held that there was no concealment of income and hence no penalty gets attracted u/s 271(1)(c). This decision of the FAA was upheld by the Tribunal. Both the FAA as well as the Tribunal came to the conclusion with regard to disallowance qua TDS that the same was an inadvertent error on the part of the accountant. With regard to the issue relating to advances not being shown as income in the same assessment year, the Appellate authorities concurrently held that there was no deliberate suppression or concealment on the part of assessee, as she was under the bona fide belief that advances received need not be shown as income in the same assessment year.

High Court held that,

++ the Revenue's counsel contended that assessee had filed revised returns only after the Revenue issued notice u/s 143 and therefore, it should be construed that the assessee is guilty of deliberate concealment of income. It is also not in dispute that as far as imposition of penalty u/s 271(1)(c) is concerned, there is a legal presumption against assessee and it is for the assessee to prima facie show bonafides in that regard. The moment the Assessee shows the same, the onus shifts to the Revenue to establish that the concealment was deliberate and willful. The assessee's counsel points out that the same issue of advances being treated as income, arose in the previous assessment years, wherein the FAA had held that such advances have to necessarily be shown as income in the same assessment year. On coming to know about this legal position, with the intention of not engaging in confrontation with the Revenue, the Assessee decided to accept the orders of FAA in previous assessment years and give quietus to the same. As the Assessee decided to accept the orders of FAA for the previous assessment years, she chose to file a revised return. Thus, it was pleaded that there was no intention to conceal, as the assessee had shown the advances in her balance sheet that was annexed to the original return. Therefore, this Court has no hesitation to hold that the assessee has not concealed the income deliberately, and therefore, is not liable for imposition of penalty u/s 271(1)(c);

++ as far as disallowance qua non furnishing of chalans for deduction and remittance of TDS, on facts, the FAA came to the conclusion that it is an inadvertent error on the part of accountant. Section 260A(7) has clearly mandated that the provisions of CPC relating to appeals to the High Court shall, as far as my be, apply in the case of appeals under this section. The Supreme Court has given the same meaning to the concept of 'substantial question of law' to both these provisions, i.e., Section 100 CPC and Section 260A of I-T Act. This can be inferred from the judgment of M.Janardhana Rao Vs. Joint Commissioner of Income Tax - 2005-TIOL-14-SC-IT-LB, wherein the Supreme Court remanded to the High Court the appeal u/s 260A of I-T Act since substantial questions of law were not framed at the time of admission and were framed after the conclusion of arguments. The same case was referred to by the Supreme Court in Hero Vinoth Vs. Seshammal [(2006) 5 SCC 545] to lay down the principles regarding substantial question of law in an appeal u/s 100 of CPC. The Supreme Court in Hero Vinoth's case has clearly held that the substantial question of law occurring u/s 100 CPC is different and distinct from a mere question of law, and further observed that the High Court should be satisfied that the case involves a substantial question of law, and not a mere question of law;

++ Applying such test laid down in Hero Vinoth's case to the present appeal, it is clear that there is no debatable question of law of substance necessary for determining the rights of the parties in the case. The present appeal is just a case where the question as to whether the assessee is liable to be mulcted with penalty u/s 271(1)(c) in the given fact scenario/conduct needs to be answered. Therefore, the proposed question of law are definitely not substantial questions of law. Thus, the factual findings returned by the CIT and ITAT are held to be conclusive, as this Court is sitting in Section 260A of I-T Act.

(See 2018-TIOL-1132-HC-MAD-IT)

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