1. This appeal by the assessee is directed against the order dt. 29th June, 2000, passed by the CIT(A) confirming penalty of Rs. 31,595 levied by the AO under Section 271(1)(c) of the IT Act, 1961, for asst, yr. 1995-96.
2. The assessee filed her return of income for asst. yr. 1995-96 on 31st Oct., 1995, declaring total income of Rs. 48,520. The said return was processed under Section 143(1)(a) of the Act on 29th Jan., 1996.
The Director of Investigation, IT Department, had conducted search in the cases of several groups as a result of which it was revealed that bogus NRI gifts were taken by different beneficiaries. This news also appeared in newspapers such as in Gujarat Samachar on 23rd March, 1996.
The assessee also received Rs. 1 lakh by demand draft dt. 29th July, 1994, from Shri Prakash B. Shah of Pune, which was accounted for by the assessee as NRI gift and was not disclosed as income in the original return.
3. The assessee filed a revised return on 22nd April, 1996, alongwith a note reading as under : "The original return of income was filed on 31st Oct., 1995 -- R.No. 3781, declaring total income of Rs. 48,250. During the financial year, I have received Rs. 1,00,000 by DD dt. 29th July, 1994 from Prakash B. Shah of Pune. The said DD was received through a financial broker. It was conveyed that the confirmation and supporting evidence will be supplied in due course but till date I have not received any such supporting evidence for the amount so accepted. In absence of the above, I am unable to substantiate the genuineness of the transaction, and identity of the persons, i.e., payer. Under the circumstances, in order to buy peace of mind and to avoid protracted litigation the same is offered as income, hence this revised return of income is filed. The same is filed in anticipation that penalty proceedings under Section 271(1)(c) will not be initiated nor any harsh or coercive action will be taken against me. I have paid the taxes in full together with interest chargeable thereon." 4. The AO after providing adequate and reasonable opportunity to the assessee levied penalty of Rs. 31,595 under Section 271(1)(c) of the Act. It may be relevant here to reproduce the findings given by the AO in paras 4 and 5 of his penalty order : "4. The above explanation offered by the assessee is neither convincing nor tenable at law. The facts of the cases covered in the above decisions are not similar to the facts of the case of the assessee. In this case, during the years 1993 to 1995, the Department had noticed that there was a trend among the people to obtain gifts from the NRI people relatives or friends and by that way they were trying to increase their capital. For obtaining such gifts they were creating bogus evidence to show that the person giving the gift as NRI and actually with love and affection the person has given the gift. Actually such persons were not relatives or friends of the person taking the gift. But on payment of some amount by way of brokerage/commission, such gifts were being given.
The Director of Inspection (Inv.) had conducted searches in several group cases and on investigation it was revealed that bogus NRI gifts of nearly 50 crores were taken by different beneficiaries and the assessee also found to be one of them. Also, verification of such bogus gifts was made by ITO, CIB, working under Dy. Director of IT (Inv.) Unit-III, Ahmedabad and it was detected by him that the assessee had obtained bogus NRI gift. It was informed by the Asstt.
Director of IT (Inv.) Unit-3(2), Ahmedabad vide his letter dt. 14th Feb., 1997, that the assessee had admitted during the course of CIB verification that the foreign gift amounting to Rs. 1,00,000 taken from Prakash B. Shah of Pune was not a genuine gift and was arranged with a view to launder unaccounted income. The assessee had admitted unaccounted income of Rs. 1,00,000 taken from Prakash B. Shah, on account of the aforesaid gift. However, during the course of assessment proceedings, the assessee stated that the demand draft dt. 29th July, 1994, was deposited in her bank account. In the statement of income filed with the return of income, no source of credit of the above amount of Rs. 1,00,000 has been given but in the statement of income filed with the revised return of income filed on 22nd April, 1996, it is stated that she had received an amount of Rs. 1,00,000 vide aforesaid demand draft from Prakash B. Shah of Pune. It is also stated that the said demand draft was received through a financial broker and it was conveyed by the above person that the confirmation and supporting evidences will be supplied in due course.
5. From the above, it is clear that the assessee has given false particulars regarding the receipt of such demand draft by her and is not in a position to show the exact source of receipt of the above amount of so called gift. It is also clear that the assessee had filed the revised return of income for this year showing additional income of Rs. 1,00,000 only after detection of income by the Department and not suo motu filed such return of income declaring unaccounted income. The assessee has not shown this unaccounted income regarding the demand draft credited in her bank account No. 184 with the Mehsana Urban Co-op. Bank Ltd. in the original return of income, and only now it is shown due to compulsion to declare the same, So it can be said that the assessee had furnished inaccurate particulars of her income with deliberate intention to conceal the income at initial stage and thereafter she had revised her return of income only after detection of above concealed income by the Department. Thus there is concealment of income on her part. Had the Department not conducted the investigation, such unaccounted income could have not come to the notice of the Department and the assessee would have not declared the same. Thus, the assessee has not furnished true and full particulars of her correct income and thereby there is furnishing of inaccurate particulars and concealment of income for the additional income declared at Rs. 1 lakh for which the provisions of Section 271(1)(c) of the Act are clearly applicable. I am, therefore, convinced that this is a fit case for levy of penalty under Section 271(1)(c) of the Act." 5. The learned CIT(A) confirmed the said penalty by observing as under in paras 9 and 10 of his order : "9. I have carefully considered the facts of the case and the submissions made. I have also gone through the decision relied upon by the authorized representative in the case of CIT v. Mussadilal Ram Bharose (1987) 165 ITR 14 (SC). It was held that the mere fact that the assessee agreed to inclusion of cash credit or other allowance in the total income on account of his inability to prove the source or to avoid the protracted litigation with the Department, does not by itself justify the levy of penalty. However, I am of the view that the ratio laid down by the Hon'ble Supreme Court in this case is not applicable to the facts of the present case. In the instant case, the assessee had admitted during the course of CIB verification that the foreign gift amounting to Rs. 1,00,000 taken from Shri Prakash B. Shah was not a genuine gift and was an arranged one with a view to launder the unaccounted income.
Therefore, it is not a case where the addition has been made merely because the assessee is unable to prove the source or to avoid protracted litigation. The addition has been made on account of concealed income which was admitted to be so by the appellant herself.
10. The authorised representative also relied on the decision of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC). However, I am of the view that the said decision also does not support the case of the appellant. As admitted by the assessee, foreign gift of Rs. 1,00,000 was shown in the books to launder the unaccounted income. Therefore, the assessee was guilty of conduct, contumacious or dishonest and therefore, the penalty is leviable in the case even as per the decision in the case of Hindustan Steel Ltd. v. State of Orissa (supra). Similarly, the ratio of Hon'ble Supreme Court in the case of Sir Shadilal Sugar & General Mills Ltd. v. CIT (1987) 186 ITR 705 (SC) is also not applicable to the facts of the case of the appellant as there is admission of unaccounted income. The mens rea is proved by the conduct of the assessee by way of obtaining bogus foreign gift and by not showing the correct income in the original return filed. I therefore hold that the assessee did not file revised return by showing additional income of Rs. 1,00,000 suo motu and to purchase peace of mind and to avoid protracted long drawn process with the Department, but for the reasons that the concealment was already detected by the Department and the assessee had no other way, but to pay the tax on the concealed income. The assessee furnished inaccurate particulars of her income with deliberate intention to conceal the income at initial stage and therefore, the return was revised only after detection of the above concealed income. I, therefore, hold that the AO was justified in levying penalty in the case under Section 271(1)(c) of the Act." 6. The learned counsel appearing for the assessee vehemently contended that the revised return was furnished by the assessee prior to detection of the concealed income in question. Such return was voluntarily filed by the assessee suo motu before any action was initiated in the case of the assessee. He, therefore, urged that the penalty levied on the assessee under Section 271(1)(c) should be cancelled.
7. The learned senior Departmental Representative strongly supported the order of CIT(A) and also relied upon the judgment in CIT v. K.Mahim (1984) 149 ITR 737 (Ker).
8. We have carefully considered the rival submissions and have gone through the orders of the learned Departmental authorities. We have also gone through the various judgments referred to in the order of the CIT{A) and the judgments cited by the learned representatives.
9. The facts discussed in para 2 of the order passed by the learned CIT(A) clearly indicate that the assessee declared total income of Rs. 48,520 in her original return of income. Assessee had also filed copy of a capital account along with said original return of income in which Rs. 1,00,000 was credited as "NRI gift". Subsequently the officers of the Department conducted searches at different places and inter alia found that bogus NRI gift of substantial amount have been obtained by various assessees through some person(s) at Pune. Such bogus gifts were estimated to be to the tune of 50 crores. This news about bogus NRI gift was also published in Gujarat Samachar on 23rd March, 1996, After this detection of such a racket operating in arranging bogus NRI gift and its wide publicity, the assessee filed a revised return on 22nd April, 1996. The contents of the note appended with the revised return inter alia shows that the demand draft of Rs. 1,00,000 dt. 29th July, 1994 was received by the assessee through a finance broker. It is pertinent to repeat that the entry of Rs. 1 lakh was made by the assessee in her capital account as NRI gift. The contumacious and dishonest conduct of the assessee is, therefore, clearly established from the time of the inception of receiving this draft of Rs. 1 lakh which was shown as NPI gift though in fact it was not a genuine gift received by the assessee from any NRI. For receiving any gift from a friend or relative out of natural love and affection, the mediator or finance broker is not necessary. The assessee in the said note appended with the revised return has also accepted the fact that she is unable to substantiate the genuineness of the transaction and the identity of the person, i.e., the payer. A draft obtained from a person who is not even known to the assessee and showing the same as gift received from some NRI clearly proves beyond doubt the conscious and deliberate act on the part of the assessee to convert her black money as white money through the device of bogus NRI gift. The filing of a revised return will not expiate contumacious conduct on the part of the assessee of not disclosing her true income in the original return of income.
10. After the officers of the IT Department detected the racket of persons engaged in arranging such NRI gifts the assessee had no choice but had to offer such amount as her income liable to tax. Once the assessee has conceded that the demand draft of Rs. 1,00,000 received from Shri Prakash B. Shah and shown as a NRI gift in her capital account is a bogus gift and she does not even know the payer, there is nothing left for the Department to prove that the assessee has deliberately concealed her income through such dirty device.
11. It may also be relevant here to make useful reference to the judgment of Hon'ble Gujarat High Court in the case of CIT v. Abdul Gafur Ahmed Wagmar (1993) 199 ITR 827 (Guj). In that case the assessee filed a return disclosing in part IV of the return a certain amount as having been received as prize money from a crossword puzzle. The ITO did not accept the genuineness of the prize money received and added the same to the income of the assessee. The ITO also added certain amount being 10 per cent commission claimed to have been paid for conversion. The Departmental authorities levied penalty for concealment of income or filing inaccurate particulars of income as the prize money claimed to have been received was a device to convert unaccounted money into ostensible prize money and hence imposed penalty under Section 271(1)(c) on the assessee. The Tribunal deleted the penalty on the ground of disclosure of the prize money in part IV of the return. The Hon'ble Gujarat High Court confirmed the said penalty by observing that the assessee's version that he secured a prize money in crossword competition, was palpably false. In the present case also the assessee is guilty of obtaining a demand draft of Rs. 1 lakh in order to convert her unaccounted money into an obtensible NRI gift. This device adopted by the assessee of obtaining a bogus NRI gift to convert her black money was detected as a result of investigation made by the officers of the IT Department which revealed that such bogus NRI gifts of about 50 crores have been obtained by various tax evaders, who were beneficiaries of receiving such bogus NRI gifts, The assessee was also one of such beneficiaries of receiving bogus NRI gifts, This fact has been admitted by the assessee herself in the note appended with the revised return.
12. It may also be relevant here to mention that Tribunal, Pune Bench in the cases of such bogus NRI gifts have confirmed minimum penalty levied under Section 271(1)(c) in large number of cases. It would be appropriate to reproduce the findings given by the Tribunal, Pune Bench in asst. yr. 1995-96 and others in the case of Rajkumar Narayandas Tharanji v. Asstt, CIT (ITA No. 700/Pune/2002, dt. 20th Dec., 2002) which is as under : "6. After hearing both sides and considering the material on record and the case law cited, it is found that all these assessees have filed their respective returns within due lime and when investigation started about bogus gifts and assessees were confronted with the material available with investigation wing of the Department, they came forward to disclose the amounts of gifts of Rs. 2,00,000 in each case along with Rs. 20,000 being expenditure incurred for arranging of the gift by filing respective revised returns in each of these cases. Now, it is to be seen whether the additional income disclosed in the revised returns which was not disclosed in the original returns could be a ground for not imposing the penalty or would it amount to concealment for levy of penalty.
Filing of the revised return by the assessee does not in itself either establishes her bona fide nor does it necessarily imply that assessee has concealed the income. The circumstances in which the revised return is filed would really matter. The revised return came to be, filed by the assessee under the circumstances and in the background that cannot be divorced from the question of bona fide of the assessee. The returns in these cases were filed after investigation about genuineness of the gift was undertaken by the Department by including amount of gifts as well as amount spent for arranging such gifts, as income from undisclosed sources. The scrutiny of the assessments further suggests that these assessees alleged that they have received a gift of Rs. 2,00,000 each and when investigation was undertaken they admitted to have arranged such gifts and then offered the amounts of so-called gifts as their income including 10 per cent of such amount as spent for arranging the gifts by filing respective revised returns. This fact has not been denied by the assessees even in penalty proceedings. What is important is that the entire process of concealment of the amount of so called gifts and modus operandi adopted by the assessees having been discovered on investigation by the Department. Filing of so called revised returns could not be said to be aimed at correcting any bona fide error in the disclosure of the particulars of income.
Filing of returns was not under the compulsion or circumstances that had come to light in which it would become difficult for the assessees to avoid substantial addition warranted in such circumstances. Even assuming that filing of the revised return was not under the compulsion when the detection was made during the investigation, yet the same would not by itself lead to the conclusion that there was no intention on the part of the assessee to conceal her income when they filed their original returns. The question whether there was any such intention would depend upon the facts and circumstances of each case that would throw light on the mental process of the assessee at the relevant time. Subsequent conduct may be one of the factors which can be taken note of but mere filing of a revised return may not be sufficient to exonerate the assessee. Even if the Department had not come across any further tangible evidence in regard to the concealment, yet so long as the question whether there was any such concealment was open before the Department, and the latter had the option to initiate appropriate proceedings, the submission of revised returns by the assessee cannot be viewed in isolation.
7. In the case of CIT v. K. Mahim (1984) 149 ITR 737 (Ker), the Kerala High Court has taken the following view : However, mere filing of a revised return by the assessee at any time prior to the Department concerning the assessee in relation to a particular concealed income, would not be sufficient to exonerate the assessee from the penal consequences. The mere fact that investigation by the Department is afoot, though nothing tangible had come into the possession of the Department at any particular point of time, may induce a dishonest assessee to submit a revised return. Such an exercise will not absolve him of the consequences flowing from ah act which on his part had already been completed, namely, the concealment of income or the particulars thereof. To the same effect in the judgment of the Kerala High Court in Indian Cloth Depot v. CIT (1988) 173 ITR 330 (Ker) wherein the plea of the assessee that the revised returns were voluntary which could not be made a basis for levy of penalty was rejected by the Inspecting Asstt. CIT, the Tribunal and even the High Court on reference. Yet in another case, similar view has been taken by the Karnataka High Court in the case of CIT v. Sudharshan Silks & Sarees (2002) 253 ITR 145 (Kar). The headnote of the said decision is reproduced hereunder : Penalty--Concealment of income--search and seizure operations showing that assessee had concealed its income--revised returns filed showing greater income--mere filing of revised returns not sufficient--no evidence that Revenue had agreed not to levy penalty--imposition of penalty valid--IT Act, 1961, Section 271(1)(c).' 8. In the case in hand, during the assessment proceedings, the assessees are found to have introduced their income under the garb of NRI gift to the extent of Rs. 2 lakhs in their respective original returns and when investigation was carried out and assessees were summoned they found themselves to be unable to substantiate the claim of NRI gifts because same were bogus as admitted by them. As such they filed their respective revised returns declaring amount of gifts as well as 10 per cent of the amount spent for arranging such alleged gifts as income from undisclosed sources. So this way, they concealed the income by furnishing inaccurate particulars in their original returns of income. The submission that revised return filed was, according to the assessee, voluntary and faithful disclosures cannot be accepted, because mere filing of the revised return is not enough. The background and the circumstances in which such returns are filed hold the key to the answer whether such returns are bona fide. What the revised return herein meant was to pre-empt any action on the part of the Department and was just to immediately close the proceedings and to avoid further investigation in the matter, Therefore, in my considered view, penalty in these cases is exigible and the same has rightly been imposed by the AO and confirmed by the learned CIT(A). So far as decision of the Gujarat High Court in CIT v. Arun Textile (1991) 192 ITR 700 (Guj) and Chief CIT (Adm) and Anr. v. Machine Tool Corporation of India Ltd. are concerned, as relied upon by the learned counsel for the assessee, do not deal with the penalty provisions and so far revised return is concerned, same has been discussed in detail in earlier part of the order. So far as Kerala High Court decision is concerned, same has not been considered by Karnataka High Court as alleged by the learned counsel for the assessee. So far as CIT v. J.K.A. Subramanian Chettiar (1977) 110 ITR 602 (Mad) is concerned, the facts are distinguishable because assessee furnished particulars before detection by the Department and to the same effect is the Bombay High Court decision Bombay Cloth Syndicate v. CIT (1995) 214 ITR 210 (Bom) which relates to revised return filed before detection and in response to public advertisement. So facts of these cases are distinguishable with the facts of the present case and hence are of no help to the assessee." 13. The Tribunal, Pune Bench, in which one of us (Accountant Member) was a party, for asst. yr. 1992-93 in Sou Chandrakala C. Surpure v. ITO (ITA Nos. 524 to 529/Pune/2002) gave the following findings in paras 6 and 7 of its order dt. 7th March, 2003 : "6. The aforesaid chart given by the learned counsel clearly indicates that the returns of income were filed after the date of issue of notice under Section 148 of the Act to all of them. In any case, such revised returns were filed after 'NRI scam' was detected by the officers of the Department. It is also an admitted fact that the amount in question was not disclosed by the assessee as income liable to tax in the original return of income. The mention of such gifts in part IV of the return instead of supporting the assessees contention goes against them as by mentioning false facts relating to receipt of foreign remittance/foreign gifts in party IV of the original returns. These assessees had made a conscious and deliberate attempt to doss the officers of the IT Department. It is necessary to disclose true and fall facts in the return of income so as to obviate levy of penalty under Section 271(1)(c) of the Act.
Instead of mentioning the true facts, the disclosure in part IV of the return was patently false and was a fraudulent act on the part of the assessee. Falsity and fraudulent nature of the transaction of such foreign gifts/foreign remittance claimed to have been received by these assessees exposed as a result of deep investigation conducted by the CBI/IT authorities.
7. On a careful consideration of entire relevant facts, we are of the considered opinion that levy of penalty under Section 271(1)(c) on the facts and circumstances of the present case is perfectly valid and justified. However, the Tribunal in earlier cases have reduced the penalty equivalent to 100 per cent of tax sought to be evaded instead of 300 per cent of tax sought to be evaded. The Tribunal in the above referred four orders have been given elaborate reasons while sustaining penalty equivalent to 100 per cent of the amount of the tax sought to be evaded in relation to such foreign gifts/foreign remittance. We, therefore, respectfully following the above referred earlier orders passed by the Tribunal in similar cases direct the AO to restrict the penalty equivalent to 100 per cent of the tax sought to be evaded by these assessees in relation to such foreign gifts/foreign remittances claimed to have been received by them, The AO is directed to recompute the amount of penalty levied under Section 271(1)(c) of the Act accordingly." 14. On a careful consideration of the entire relevant facts, we are of the considered opinion that the assessee acted deliberately in defiance of law and was guilty of contumacious and dishonest conduct and was clearly liable to levy of penalty under Section 271(1)(c) of the Act.
The revised return filed by the assessee on the facts of the present case cannot expiate the contumacious conduct on the part of the assessee of obtaining such bogus NRI gift and of not showing the said amount as her income in the original return of income submitted by her.
We, therefore, do not find any justification to interfere with the view taken by the learned CIT(A) of confirming the said penalty.