Raju H Patadia, Hubli V. Asst.C.I.T., Hubli

CO 12/BANG/2016

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2472 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-10-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MEERA SRIVASTAVA
• Keywords: Revised return
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, BANGALORE BEFORE S MT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 1180/ BANG/20 15 (ASSESSMENT YEAR: 201 - 011 ) ASST. COMMISSIONER OF INCOME - TAX, CIRCLE - 3(1) HUBBALLI - 580025. VS. APPELLANT SHRI RAJU H PATADIA, PROP.M/S.GOLD PALACE, DURGADBAIL, HUBBALLI. PAN: ACVPP 8998B RESPONDENT AND CROSS OBJN.NO.12/BANG/2016 (IN ITA NO. 1180/ BANG/20 15) (ASSESSMENT YEAR: 201 - 011 ) SHRI RAJU H PATADIA, HUBBALLI. VS. CROSS - OBJECTOR ASST. COMMISSIONER OF INCOME - TAX, HUBBALLI. RESPONDENT REVENUE BY : SHRI V.SRIDHAR, CA ASSESSEE BY : SMT.MEERA SRIVASTAVA, ADDL.CIT (DR) DATE OF HEARING : 29/09/2016 DATE OF PRONOUNCEM ENT : 19 /10/2016 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS)[CIT(A)] , HUBBALLI, DATED 29/ 0 5/2015 FOR THE ASSESSMENT YEAR 2010 - 11 ITA NO 1180/B/2015 & CO 12/BANG/ 2016 PAGE 2 OF 10 DELETING PENA LTY LEVIED U/S 271(1)(C) OF THE INCOME - TAX ACT,1961 [ THE ACT FOR SHORT]. THE ASSESSEE HAS COME UP IN CROSS OBJECTIONS. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: 3. BRIEFLY FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF DEALING IN GOLD ORNAMENT , BUILLION /STONES. RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010 - 11 WAS FILED ON 15/10/2010 DECLARING TOTAL INCOME OF RS.2 1,55,710/ - . SUBSEQUENTLY , SURVEY OPERATIONS U/S 133A OF THE ACT WERE CONDUCTED ON 2 1 /10/2010 IN THE BUSINESS PREMISES OF THE RESPONDENT - ASSESSEE. DURING THE COURSE OF SURVEY PROCEEDINGS THE ASSESSEE MADE A DECLARATION OF ADDITIONAL INCOME ITA NO 1180/B/2015 & CO 12/BANG/ 2016 PAGE 3 OF 10 OF RS.38,19,474/ - ON ACCOUNT OF UNDER - VALUATION OF THE CLOSING STOCK. THE RESP ONDENT - ASSESSEE ALSO UNDERTAKEN TO FILE REVISED RETURN OFFERING ADDITIONAL INCOME BUT FAILED TO DO SO. FURTHER, A SUM OF RS.7,60,800/ - WAS DETECTED ON ACCOUNT OF UNDERVALUATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THUS, THE ASSESSING OFFICER [AO] MADE ADDITION OF RS.45,80,274/ - TO THE RETURNED INCOME. HOWEVER, ADDITIONS HAVE NOT BEEN AGITATED BEFORE THE APPELLATE AUTHORITIES. THUS, ASSESSMENT REACHED FINALITY. 4. SUBSEQUENTLY, THE AO ISSUED SHOW CAUSE NOTICE CALLING UPON THE ASSESSEE T O SHOW CAUSE WHY AN ORDER IMPOSING PENALTY FOR CONCEALMENT OF PARTICULARS OF INCOME. IN RESPONSE TO SHOW CAUSE, IT WAS SUBMITTED THAT THE ASSESSEE HAD NOT CONCEALED ANY PARTICULARS OF INCOME AND THE ADDITION WAS MADE ONLY ON ACCOUNT OF DISALLOWANCE OF EXP ENDITURE ON ESTIMATE BASIS AND THEREFORE PENALTY SHOULD NOT BE LEVIED. THE ABOVE EXPLANATION WAS NOT ACCEPTED BY THE AO BY HOLDING THAT THE ADDITION WAS NOT MADE ON ESTIMATE BASIS BUT THE ADDITION WAS MADE ON THE GROUND OF UNDERVALUATION OF STOCK. THE A O FURTHER INFERRED THAT HAD THE INTENTION OF THE ASSESSEE HAD NOT BEEN TO CONCEAL PARTICULARS OF INCOME, ASSESSEE WOULD HAVE CHOSEN TO FILE REVISED RETURN DECLARING ADDITIONAL INCOME. IT IS ONLY DUE TO SURVEY OPERATIONS U/S 133A UNDERVALUATION WAS DETECTE D. THEREFORE HE PROCEEDED TO LEVY PENALTY OF RS.13,23,380/ - VIDE ORDER DATED 27/9/2013. ITA NO 1180/B/2015 & CO 12/BANG/ 2016 PAGE 4 OF 10 5. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE CIT(A) WHO HAD DELETED THE PENALTY BY HOLDING THAT PENALTY IS NOT LEVIABLE ON ACCOUNT OF ADDITIONS MADE ON ESTIMATE BASIS. IN SUPPORT OF THIS PROPOSITION, HE RELIED ON THE PLETHORA OF DECISIONS. 6. BEING AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 6.1 LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDED THAT THE ASSESSEE HAD DECLARED ADDITION AL INCOME ONLY ON ACCOUNT OF DETECTION MADE BY THE DEPARTMENT ON ACCOUNT OF SURVEY OPERATIONS. HAD THE SURVEY OPERATIONS NOT TAKEN PLACE, ASSESSEE WOULD NOT HAVE DISCLOSED ADDITIONAL INCOME AND THUS IT IS A CLEAR CASE OF CONCEALMENT OF PARTICULARS OF INCO ME AND THEREFORE PENALTY IS LEVIABLE. THUS, HE PRAYED FOR SUSTENANCE OF ORDER OF PENALTY. 6.2 ON THE OTHER HAND, LEARNED AR OF THE ASSESSEE CONTENDED THAT ADDITIONAL INCOME WAS DISCLOSED ONLY ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK. THERE IS NO DIFFERENCE IN QUANTITATIVE STOCK. THE ASSESSEE HAS BEEN FOLLOWING LAST - IN - FIRST - OUT [LIFO] FOR THE PURPOSE OF VALUATION BUT FOR THE INSISTENCE OF THE AO, THE ABOVE HAS BEEN VALUED AT FIRST - IN - FIRST - OUT [FIFO] METHOD. ON ACCOUNT OF THIS, THE ADDITION WAS OFFERED ON A CONDITION NOT TO LEVY PENALTY U/S 271(1)(C) OF THE ACT. HE PRAYED THAT THERE WAS NO PARTICULARS OF INCOME HAVE BEEN FURNISHED BY THE ASSESSEE. THEREFORE PENALTY CANNOT BE LEVIED. ITA NO 1180/B/2015 & CO 12/BANG/ 2016 PAGE 5 OF 10 7. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERI AL ON RECORD. THE ONLY ISSUE IN THE PRESENT APPEAL IS WHETHER THE AO IS JUSTIFIED IN LEVYING PENALTY OF RS.13,23,380/ - U/S 271(1)(C) OF THE ACT. NO DOUBT ADDITIONS HAVE BEEN MADE BY THE AO BASED ON THE DISCLOSURE MADE BY THE ASSESSEE DURING THE COURSE OF SURVEY OPERATIONS U/S 133A OF THE ACT. THERE WAS NO ALLEGATION BY THE ASSESSEE HAT DISCLOSURE WAS M ADE BY HIM OUT OF DURESS AND COERC ION BY THE DEPARTMENT. NO DOUBT, ADDITION WAS ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK AND IT IS NO BODY CASE THERE IS ANY DIFFERENCE IN QUANTITATIVE CLOSING STOCK. THE SUBMISSION OF THE ASSESSEE THAT THE ADDITION WAS OFFERED TO TAX ON ACCOUNT OF CHANGE IN THE METHOD OF CLOSING STOCK FROM LIFO AND FIFO AT THE INSISTENCE OF THE AO, IS NOT BORNE OUT OF RECORD. THEREFOR E, IT FOLLOWS THAT THE DIFFERENCE IN VALUATION ARISEN ON ACCOUNT OF ADOPTING WRONG METHOD OF VALUATION OF CLOSING STOCK WHICH AMOUNTS TO CONCEALMENT OF PARTICULARS OF INCOME. THEREFORE, IN OUR CONSIDERED OPINION, THE AO WAS JUSTIFIED IN LEVYING PENALTY U/S 271(1)(C) OF THE ACT. THE REASONING OF THE CIT(A) THAT PENALTY CANNOT BE LEVIED IN ESTIMATE BASIS, CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE AS NO ADDITION WAS MADE ON ESTIMATE BASIS AND THE CIT(A) HAS ALLOWED APPEAL ON WRONG PREMISE. WE REVERSE THE FINDING OF THE CIT(A) AND IN THIS CONTEXT RATIO OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF MAK DATA (P) LTD. VS. CIT (2013) 358 ITR 598 IS SQUARELY APPLICABLE WHEREIN, IT HAS BEEN HELD THAT ITA NO 1180/B/2015 & CO 12/BANG/ 2016 PAGE 6 OF 10 ADDITION MADE ON VOLUNTARY DISCLOSURE DOES NOT ABSOLVE THE ASSESSEE FROM PENAL PROVISIONS OF THE ACT. THE RELEVANT PARA S. ARE REPRODUCED BELOW: 6. WE HAVE HEARD COUNSEL ON EITHER SIDE. WE FULLY CONCUR WITH THE VIEW OF THE HIGH COURT THAT THE TRIBUNAL HAS NOT PROPERLY UNDERSTOOD OR APPRECIATED T HE SCOPE OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT, WHICH READS AS FOLLOWS : - 'EXPLANATION 1 - WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATIO N OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BON A FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB - SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED.' 7. THE AO, IN OUR VIEW, SHALL NOT BE CARRIED AWAY BY THE PLEA OF THE ASSESSEE LIKE 'VOLUNTARY DISCLOSURE', 'BUY PEACE', 'AVOID LITIGATION', 'AMICABLE SETTLEMENT', ETC. TO EXPLAIN AWAY ITS CONDUCT. THE QUESTION IS WHETHER THE ASSESSEE HAS OFFERED ANY EXPLANATION FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. EXPLANATION TO SECTION 271(1) RA ISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERENCE IS NOTICED BY THE AO, BETWEEN REPORTED AND ASSESSED INCOME. THE BURDEN IS THEN ON THE ASSESSEE TO SHOW OTHERWISE, BY COGENT AND RELIABLE EVIDENCE. WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION, HAS BEE N DISCHARGED BY HIM, THE ONUS SHIFTS ON ITA NO 1180/B/2015 & CO 12/BANG/ 2016 PAGE 7 OF 10 THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED THE INCOME AND NOT OTHERWISE. 8. ASSESSEE HAS ONLY STATED THAT HE HAD SURRENDERED THE ADDITIONAL SUM OF RS.40,74,000/ - WITH A VIEW TO AVOID LITIGATION, BUY PEACE AND TO CHANNELIZE THE ENERGY AND RESOURCES TOWARDS PRODUCTIVE WORK AND TO MAKE AMICABLE SETTLEMENT WITH THE INCOME TAX DEPARTMENT. STATUTE DOES NOT RECOGNIZE THOSE TYPES OF DEFENCES UNDER THE EXPLANATION 1 TO SECTION 271(L)(C) OF THE ACT. IT IS T RITE LAW THAT THE VOLUNTARY DISCLOSURE DOES NOT RELEASE THE APPELLANT - ASSESSEE FROM THE MISCHIEF OF PENAL PROCEEDINGS. THE LAW DOES NOT PROVIDE THAT WHEN AN ASSESSEE MAKES A VOLUNTARY DISCLOSURE OF HIS CONCEALED INCOME, HE HAD TO BE ABSOLVED FROM PENALTY. 9. WE ARE OF THE VIEW THAT THE SURRENDER OF INCOME IN THIS CASE IS NOT VOLUNTARY IN THE SENSE THAT THE OFFER OF SURRENDER WAS MADE IN VIEW OF DETECTION MADE BY THE AO IN THE SEARCH CONDUCTED IN THE SISTER CONCERN OF THE ASSESSEE. IN THAT SITUATION, IT CANNOT BE SAID THAT THE SURRENDER OF INCOME WAS VOLUNTARY. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS NOTICED THAT CERTAIN DOCUMENTS COMPRISING OF SHARE APPLICATION FORMS, BANK STATEMENTS, MEMORANDUM OF ASSOCIATION OF COMPANIES, AFFIDAVITS, COPIES OF INCOME TAX RETURNS AND ASSESSMENT ORDERS AND BLANK SHARE TRANSFER DEEDS DULY SIGNED, HAVE BEEN IMPOUNDED IN THE COURSE OF SURVEY PROCEEDINGS UNDER SECTION 133A CONDUCTED ON 16.12.2003, IN THE CASE OF A SISTER CONCERN OF THE ASSESSEE. THE SURVEY WAS COND UCTED MORE THAN 10 MONTHS BEFORE THE ASSESSEE FILED ITS RETURN OF INCOME. HAD IT BEEN THE INTENTION OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF ITS INCOME, IT WOULD HAVE FILED THE RETURN DECLARING AN INCOME INCLUSIVE OF THE AMOUNT WHICH WAS SURREND ERED LATER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. CONSEQUENTLY, IT IS CLEAR THAT THE ASSESSEE HAD NO INTENTION TO DECLARE ITS TRUE INCOME. IT IS THE STATUTORY DUTY OF THE ASSESSEE TO RECORD ALL ITS TRANSACTIONS IN THE BOOKS OF ACCOUNT, TO EXPLAIN THE SOURCE OF PAYMENTS MADE BY IT AND TO DECLARE ITS TRUE INCOME IN THE RETURN OF INCOME FILED BY IT FROM YEAR TO YEAR. THE AO, IN OUR VIEW, HAS RECORDED A CATEGORICAL FINDING THAT HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEALED TRUE PARTICULARS OF INCOM E AND IS LIABLE FOR PENALTY PROCEEDINGS UNDER SECTION 271 READ WITH SECTION 274 OF THE INCOME TAX ACT, 1961. ITA NO 1180/B/2015 & CO 12/BANG/ 2016 PAGE 8 OF 10 8. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF MAK DATA (P) LTD. (SUPRA) THE APPEAL FILED BY THE REVENUE I S ALLOWED. 9. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF CROSS OBJECTIONS : 15. WE SHALL DEAL WITH THE VERY MAINTAINABILITY OF THE PRESENT CROSS - OBJECTIONS. FROM THE GROUNDS OF CROSS OBJECTIONS, IT IS CLEAR THAT THE ASSESSEE HAS RAIS ED THE ISSUE OF VALIDITY OF SHOW CAUSE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT. THE PROVISIONS GOVERNING FILING OF CROSS - OBJECTIONS ARE FOUND AT SUB - SEC.(4) OF SEC.253 OF THE ACT WHICH READ AS UNDER: APPEALS TO THE APPELLATE TRIBUNAL. 25 3 (4) THE ASSESSING OFFICER OR THE ASSESSEE, AS THE CASE MAY BE, ON RECEIPT OF NOTICE THAT AN APPEAL AGAINST THE ORDER OF THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) OR THE ASSESSING OFFICER IN PURSUANCE ITA NO 1180/B/2015 & CO 12/BANG/ 2016 PAGE 9 OF 10 OF THE DIREC TIONS OF THE DISPUTE RESOLUTION PANEL HAS BEEN PREFERRED UNDER SUB - SECTION (1) OR SUB - SECTION (2) OR SUB - SECTION (2A) BY THE OTHER PARTY, MAY, NOTWITHSTANDING THAT HE MAY NOT HAVE APPEALED AGAINST SUCH ORDER OR ANY PART THEREOF ; WITHIN THIRTY DAYS OF THE R ECEIPT OF THE NOTICE, FILE A MEMORANDUM OF CROSS - OBJECTIONS, VERIFIED IN THE PRESCRIBED MANNER, AGAINST ANY PART OF THE ORDER OF THE ASSESSING OFFICER (IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL) OR DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS), AND SUCH MEMORANDUM SHALL BE DISPOSED OF BY THE APPELLATE TRIBUNAL AS IF IT WERE AN APPEAL PRESENTED WITHIN THE TIME SPECIFIED IN SUB - SECTION (3) OR SUB - SECTION (3A). 16. FROM A BARE PERUSAL OF THE ABOVE PROVISION, IT IS CLEAR THAT THE LEGISLATURE HAS CHOSEN TO USE THE EXPRESSION AGAINST SUCH ORDER OR ANY PART THEREOF WHICH MEANS THAT CROSS - OBJECTIONS CAN BE FILED WITH REFERENCE TO SAME GROUND OF APPEAL WHICH IS ADVERSELY DECIDED AGAINST THE RESPONDENT I N APPEAL. IF, THERE HAS BEEN NO ADJUDICATION ON ANY OF THE GROUNDS OF APPEAL RAISED BEFORE THE CIT(A), THE CROSS OBJECTIONS CANNOT BE FILED ON SUCH A GROUND, THOUGH RAISED BUT NOT DECIDED SPECIFICALLY. IF THE ASSESSEE IS AGGRIEVED BY NON - ADJUDICATION PER SE , ASSESSEE CAN COME BEFORE THE TRIBUNAL ONLY BY WAY OF AN APPEAL ONLY . THUS, HAVING REGARD TO PLAIN PROVISIONS OF STATUTE, IN ABSENCE OF NON - ADJUDICATION OF GROUND BY THE CIT(A), ASSESSEE CAN COME ONLY BY WAY OF APPEAL BEFORE THE TRIBUNAL, NOT BY WAY O F CROSS OBJECTIONS. IN THE PRESENT CASE, THE CIT(A) HAD NO OCCASION TO DEAL WITH THE ISSUE RAISED BY WAY OF CROSS OBJECTIONS, AS THE ASSESSEE NEVER CONTESTED THIS ISSUE EITHER BEFORE THE AO OR BEFORE THE CIT(A). THE CROSS OBJECTIONS DO NOT WIDEN THE SC OPE OF SUBJECT MATTER OF ITA NO 1180/B/2015 & CO 12/BANG/ 2016 PAGE 10 OF 10 APPEAL. THEREFORE, THE CROSS OBJECTIONS ARE NOT MAINTAINABLE AND DISMISSED AS SUCH. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH OCTOBER , 2016 SD/ - SD/ - (ASHA VIJAYARAGHAVAN) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUN TANT MEMBER PLACE : BANGALORE D A T E D : 19 / 1 0/2016 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) - II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE