Friday, November 23, 2012

Concealment penalty is inevitable if bogus claim is withdrawn in revised return filed after initiation of survey

The assessee, a public limited company, claimed a deduction of Rs. 10,00,000 under section 35CCA purportedly paid to a trust for assessment year 1983-84. Subsequently, the claim was withdrawn by filing a revised return. During assessment, the AO observed that assessee had revised its return of income only as a result of survey action taken by revenue in the assessee’s premises. It was further noticed by AO that the assessee was in knowledge of the fact that the trust was not genuine and had deliberately made a false claim under Sec. 35CCA to reduce its taxable income. Accordingly, the AO imposed the maximum penalty, being 200% of the tax sought to be evaded. On appeal, the CIT(A) as well as ITAT held in favour of assessee.

On revenue’s appeal, the High Court held in favour of revenue as under:

1) The assessee made the donation through cheque, which was encashed through a bogus bank account opened specifically for this purpose;

2) It was evident from the records that bank account of the drawee had been opened in a fictitious name merely for the purpose of misappropriating the amount;

3) The assessee’s contention that it was a victim of a fraud played by several persons acting in concert couldn’t be accepted because the special crossing (‘account
payee’) in the cheque was converted or altered into an ordinary crossing by the assessee’s account manager and senior advisor who had also affixed their signatures;

4) The revised return was filed by assessee only when it was cornered and the income tax authorities had collected material on the basis of which it could be said that the claim for deduction was false or bogus.

From the above facts, it was held that filing of revised return was an act of despair and it couldn’t benefit the assessee in any way. Accordingly, penalty order passed by AO was restored – CIT v. Usha International Ltd. [2012] 27 227 (Delhi)