Surya Mangapathi Raju Penmetsa, Visakhapatnam V. Joint Commissioner of Income Tax, (OSD), Central Circle-2, Visakhapatnam

CO 51/VIZ/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 0922 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 02-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P S MURTHY
• Keywords: Salary income; Principle of natural justice; Question of law
• Section: 143(3); 133A; 147; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 275 / VIZ /201 8 (ASST. YEAR : 20 13 - 14 ) JCIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM. V S . SURYA MANGAPATHI RAJU PENMETSA, D.NO. 11 - 9 - 6/2, FLAT NO. 90, DASAPALLA HILLS, VISAKHAPATNAM. PAN NO. AHAPP 1548 F (APPELLANT) (RESPONDENT) C.O.NO. 51/VIZ/2018 (ARISING OUT OF ITA NO. 275 / VIZ / 2018 ) (ASST. YEAR : 20 13 - 14 ) SURYA MANGAPATHI RAJU PENMETSA, D.NO. 11 - 9 - 6/2, FLAT NO. 90, DASAPALLA HILLS, VISAKHAPATNAM. VS. JCIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM. PAN NO. AHAPP 1548 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI P.S. MURTHY SR. DR DATE OF HEARING : 28 / 0 8 /201 8 . DATE OF PRONOUNCEMENT : 05 / 1 0 /201 8 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH IS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF 2 ITA NO. 275 /VIZ/2018 C.O.NO. 51/VIZ/2018 ( P. SURYA MANGAPATHI RAJU ) INCOME TAX (APPEALS) - 3 , VISAKHAPATNAM , DATED 26 /0 2 /201 8 FOR THE ASSESSMENT YEAR 20 13 - 14 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT ASSESSEE IS AN INDIVIDUAL AND MANAGING DIRECTOR OF M/S. MERIDIAN PROMOTERS PVT. LTD., VISAKHAPATNAM , DERIVING INCOME FROM SALARY AND RENTAL INCOME APART FROM AGRICULTURAL INCOME. AS PER THE INFORMATION RECEIVED FROM T HE ASSISTANT DIRECTOR OF INCOME TAX (INVESTIGATION) , UNIT - III(1), VISAKHAPATNAM , THE ASSESSEE HAD SOLD A PIECE OF LAND FOR A SALE CONSIDERATION OF RS. 1,26,74,000/ - ON 19/11/2012 , WHICH HE HAD PURCHASED FOR RS. 18,90,9000/ - IN THE YEAR 2001. THUS, LONG TERM CAPITAL GAIN IS ATTRACTED IN THE SAID TRANSACTION, BUT ASSESSEE HAS NOT PAID ANY TAX ON CAPITAL GAIN. FURTHER, IT WAS ALSO OBSERVED FROM THE BANK STATEMENT OF ICICI, A/C. NO.00605001176 FURNISHED BY THE ASSESSEE DURING T HE COURSE OF INVESTIGATION PROCEEDINGS THAT HUGE CASH DEPOSITS ARE THERE ON DIFFERENT DATES IN THE FINANCIAL YEAR 2012 - 13 APART FROM HIS SALARY INCOME AND AGRICULTURAL INCOME. SINCE THE ASSESSEE DID NOT FILE THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 20 13 - 14 REFLECTING THE ABOVE TRANSACTION, THE ASSESSING OFFICER HAS A REASONABLE TO BELIEF THAT THE INCOME CHARGEABLE TO TAX H AS ESCAPED INCOME . ACCORDINGLY, CASE OF THE ASSESSEE WAS REOPENED FOR ASSESSMENT 3 ITA NO. 275 /VIZ/2018 C.O.NO. 51/VIZ/2018 ( P. SURYA MANGAPATHI RAJU ) YEAR 2013 - 14 UNDER SECTION 147 OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS 'ACT') AND A NOTICE UNDER SECTION 147 OF THE ACT WAS SERVED ON THE ASSESSEE ON 21/03/2015 CALLING FOR THE RETURN OF INCOME. THE ASSESSEE HAS NOT COMPLIED WITH THE NOTICES ISSUED BY THE ASSESSING OFFICER. THEREFORE, TH E ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT EXPARTE UNDER SECTION 144 READ WITH SEC. 147 OF THE ACT ON 15/10/2015 BY MAKING THE ADDITION IN RESPECT OF LONG TERM CAPITAL GAIN OF RS. 90,93,422/ - ; CASH CREDITS OF RS. 5,83,000/ - FROM THE UNKNOWN SOURCE ; INCOME FROM SALARY OF RS. 18,00,000/ - AND INCOME FROM HOUSE PROPERTY OF RS. 67,200/ - . ACCORDINGLY, THE ASSESSING OFFICER HAS ASSESSED THE INCOME OF THE ASSESSEE OF RS.1,15,43,620/ - . SUBSEQUENTLY, THE ASSESSING OFFICER HAS ISSUED A NOTICE UNDER SECTION 274 READ WITH SEC. 271(1)(C) OF THE ACT ON 15/10/2015 . THE ASSESSEE HAS NOT COMPLIED WITH THE NOTICE ISSUED BY THE ASSESSING OFFICER. SUBSEQUENTLY, THE ASSESSING OFFICER SENT ANOTHER LETTER DATED 18/04/2016 CALLING EXPLANATION FROM THE ASSESSEE. IN RESPONS E TO THE NOTICE, THE ASSESSEE ASKED THE ASSESSING OFFICER FOR ONE MONTH TIME TO FILE EXPLANATION, HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED THE TIME ASKED BY THE ASSESSEE AND LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR AN AMOUNT OF 4 ITA NO. 275 /VIZ/2018 C.O.NO. 51/VIZ/2018 ( P. SURYA MANGAPATHI RAJU ) RS.25,27 ,350/ - BY OBSERVING THAT THE UNDERSIGNED IS SPECIFIED THAT THE ASSESSEE HAS A TAXABLE INCOME OF RS. 1,15,43,620/ - DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2013 - 14 AND HENCE, IS LIABLE TO PAY PENALTY WHICH SHALL NOT BE LESS THAN 100% OF TAX SOUGHT TO BE EVADED , BUT SHALL NOT BE EXCEEDING 300% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED AND THE PENALTY SO LEVIABLE IS IN ADDITION TO THE TAX PAYABLE BY THE ASSESSEE . 3 . ON APPEAL BEFO RE THE LD. CIT(A) , THE ASSESSEE HAS RAISED A LEGAL GROUND THAT NOTICE ISSUED ON 15/10/2015 FOR INITIATION OF PENALTY IS NOT CLEAR WHETHER PENALTY IS INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE OF PARTICULARS OF INCOME. THE LD. CIT(A) BY CONSIDERING THE LEGAL GROUND RAISED BY THE ASSESSEE AND ALSO BY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF P R. CIT VS. SMT. BAISETTY REVATHI IN I.T.T.A. NO. 684/2016 , DATED 30/07/2017 AND ALSO BY FOLLO WING THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY [ 359 ITR 565 (KAR.) ] , CANCELLED THE PENALTY LEVIED BY THE ASSESSING OFFICER. 4 . ON BEING AGGRIEVED , REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5 ITA NO. 275 /VIZ/2018 C.O.NO. 51/VIZ/2018 ( P. SURYA MANGAPATHI RAJU ) 5. LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER. 6 . ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE LD. CIT(A). 7 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 8 . THE LD. CIT(A) HAS CONSIDERED THE LEGAL GROUND RAISED BY THE ASSESSEE BEFORE HIM I.E. ISSUANCE OF PENALTY NOTICE DATED 15/10/2015 AND GAVE A FINDING THAT ASSESSING OFFICER HAS NOT STRUCK OFF THE PORTION WHICH IS NOT APPLICABLE WHILE INITIATING THE PENALTY PROCEEDINGS , AND BY FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SMT. BAISETTI REVATHI (SUPRA) , CANCELLED THE PENALTY LEVIED BY THE ASSESSING OFFICER. WE HAVE ALSO PERUSED THE PENALTY NOTICE ISSUED BY THE ASSESSING OFFICER DATED 15/10/2015 AND FIND THAT THE ASSESSING OFFICER HAS NOT STRUCK OFF THE PORTION WHICH IS NOT APPLICABLE WHILE INITIATING THE PENALTY PROCEEDINGS. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE NOTICE IS EXTRACTED AS UNDER: - WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2009 - 10, IT APPEARS TO ME THAT YOU X X X X X X X X X * H AVE CONCEALED TH E PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 6 ITA NO. 275 /VIZ/2018 C.O.NO. 51/VIZ/2018 ( P. SURYA MANGAPATHI RAJU ) 9. FROM THE ABOVE, IT IS NOT CLEAR WHETHER PENALTY IS INITIATED FOR CONCEALMENT OF INCOME OR FURNISHED INACCURATE OF PARTICULARS OF SUCH INCOME . UNDER THE SIMILAR FACTS AND C IRCUMSTANCES OF THE CASE, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF KONCHADA SREERAM VS. ITO IN ITA NO. 388/VIZ/2015, BY ORDER DATED 06/10/2017 , WHEREIN BY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SMT. BAISETTY REVATHI (SUPRA) HAS HELD AS UNDER: - 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THIS CASE, THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME. THE DEPARTMENT HAS CONDUCTED THE SURVEY U/S 133A AND COMPLETED THE ASSESSMENT U/S 143(3) ON TOTAL INCOME OF RS.15,43,041/ - AND INITIATED PENALTY PROCEEDINGS U/S 271(1)(C). THE FACT IS THAT LONG TERM CAPITAL GAINS FOR SALE OF THE PROP ERTY HAVE COME TO THE NOTICE OF THE ASSESSING OFFICER BECAUSE OF THE EFFORTS MADE BY THE DEPARTMENT. THEREFORE, THE AO HAS INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) AND ISSUED SHOW CAUSE NOTICE IN THE PRINTED PROFORMA OF PENALTY. THE AO HAS ISSUED T HE PENALTY NOTICE WHICH READS AS UNDER: - WHEREAS IN THE COURSE OF THE PROCEEDING BEFORE ME FOR THE ASST. YEAR 2007 - 08 IT APPEARS TO ME THAT YOU HAVE CONCEALED THE PARTICULARS OF YOUR SOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 6.1. FROM THE NOTICE ISSUED BY THE AO, IT IS OBSERVED THAT THE ASSESSING OFFICER HAD ISSUED THE NOTICE FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS. AS PER THE NOTICE, THE ASSESSING OFFICER WAS NOT SURE OF WHICH LIMB OF THE OFFENCE HE SOUGHT THE EXPLANATION FROM THE ASSESSEE, WHETHER IT WAS FOR THE CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS. AS PER THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT CITED, FOR STARTING THE PENALTY PROCEEDINGS, THE CONDITION PRE CEDENT IS THAT THE ASSESSING OFFICER MUST BE SATISFIED THAT A PERSON HAS EITHER CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE 7 ITA NO. 275 /VIZ/2018 C.O.NO. 51/VIZ/2018 ( P. SURYA MANGAPATHI RAJU ) PARTICULARS OF SUCH INCOME. THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE AWARE OF THE GROUNDS ON WHICH IMPOSITION OF PENALTY IS PROPOSED AS HE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE THE FULL OPPORTUNITY TO MEET THE CASE OF THE REVENUE SO AS TO SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIS T AND THAT HE IS NOT LIABLE TO PAY THE PENALTY. THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE LAW CITED HELD THAT THE PRACTICE OF THE REVENUE IN SENDING THE PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IN 271(1)(C) ARE MENTIONED WOULD NOT SATISFY THE RE QUIREMENT OF LAW WHEN THE CONSEQUENCE OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HAS TO PAY THE PENALTY RANGING FROM 100% TO 300% OF THE TAX LIABILITY. AS THE PROVISIONS OF SECTION 271(1)(C) HAVE TO BE STRICTLY CONSTRUE D, THE HONBLE HIGH COURT OF KARNATAKA MANDATED THAT THE NOTICE ISSUED SHOULD BE SET OUT THE GROUNDS WHICH THE ASSESSEE HAS TO MEET SPECIFICALLY, OTHERWISE THE PRINCIPLES OF NATURAL JUSTICE WOULD BE OFFENDED AS THE SHOW CAUSE NOTICE WOULD BE VAGUE. ON TH E SIMILAR FACTS, HONBLE SUPREME COURT DISMISSED THE SLP IN THE CASE OF SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 248(SC). LD. DRS ARGUMENT THAT THE CASE IS DISTINGUISHABLE ON FACTS IS NOT ACCEPTABLE SINCE THE LD. DR RELIED ON THE PASSING OBSERVATION OF THE HONBLE HIGH COURT OF AP. IN THE ASSESSEES CASE, THE ISSUE IS THE DEFECTIVE NOTICE U/S 271(1)(C) BUT NOT THE PENALTY ORDER. UNLESS THE NOTICE ISSUED U/S 271(1)(C) IS VALID THE PENALTY ORDER CANNOT BE HELD TO BE VALID. THE ASSESSING OFFICER DID NOT S TRIKE OFF THE IRRELEVANT COLUMN IN THE NOTICE AND MADE KNOWN THE ASSESSEE WHETHER THE PENALTY WAS INITIATED FOR THE CONCEALMENT OF INCOME OR FOR FURNISHING THE INACCURATE PARTICULARS. IN THE ASSESSMENT ORDER ALSO THE AO SIMPLY RECORDED THAT THE PENALTY PR OCEEDINGS U/S 271(1)(C) ARE INITIATED SEPARATELY. NEITHER IN THE ASSESSMENT ORDER NOR IN THE PENALTY NOTICE, THE ASSESSING OFFICER HAS PUT THE ASSESSEE ON NOTICE FOR WHICH OFFENCE, THE PENALTY U/S 271 WAS INITIATED. THEREFORE, THE CASE IS SQUARELY COVERE D BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF CITED (SUPRA) WHEREIN THE HONBLE HIGH COURT HELD AS UNDER: ON PRINCIPLE, WHEN PENALTY PROCEEDINGS ARE SOUGHT TO BE INITIATED BY THE REVENUE UNDER SECTION 271(1)(C) OF THE ACT OF 1961, THE SP ECIFIC GROUND WHICH FORMS THE FOUNDATION THEREFORE HAS TO BE SPELT OUT IN CLEAR TERMS OTHERWISE, ON ASSESEE WOULD NOT HAVE PROPER OPPORTUNITY TO PUT FORTH HIS DEFENCE. WHEN THE PROCEEDINGS ARE PENAL IN NATURE RESULTING IN IMPOSITION OF PENALTY RANGING FROM 100% TO 300% OF THE TAX LIABILITY, THE CHARGE MUST BE UNEQUIVOCAL AND UNAMBIGUOUS. WHEN THE CHARGE IS EITHER CONCEALMENT OF 8 ITA NO. 275 /VIZ/2018 C.O.NO. 51/VIZ/2018 ( P. SURYA MANGAPATHI RAJU ) PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS THEREOF, THE REVENUE MUST SPECIFY AS TO WHICH ONE OF THE TWO IS SOUGH T TO BE PRESSED INTO SERVICE AND CANNOT BE PERMITTED TO CLUB BOTH BY INTERJECTING AN 'OR' BETWEEN THE TWO, AS IN THE PRESENT CASE. THIS AMBIGUITY IN THE SHOW - CAUSE NOTICE IS FURTHER COMPOUNDED PRESENTLY BY THE CONFUSED FINDING OF THE ASSESSING OFFICER THAT HE WAS SATISFIED THAT THE ASSESSEE WAS GUILTY OF BOTH. WE ARE THEREFORE OF THE OPINION THAT THE ORDER UNDER APPEAL DOES NOT BROOK INTERFERENCE ON ANY GROUND. WE FIND NO QUESTION OF LAW, MUCH LESS A SUBSTANTIAL ONE, ARISING FOR CONSIDERATION WARRANTING AD MISSION OF THIS APPEAL. 6.2. ON THE SIMILAR FACTS, THE COORDINATE BENCH OF ITAT, VISAKHAPATNAM IN ITA NO.229/VIZ/2015 IN THE CASE OF NARAYANA REDDY ENTERPRISES, FOLLOWING THE ORDER OF THE COORDINATE BENCH IN THE CASE OF SMT. MAKINA ANNAPURNA VS. ITO, VIS AKHAPATNAM IN ITA NOS.604 & 605/VIZAG/2014 DATED 2.2.2017 HELD THAT NON - STRIKING OF THE IRRELEVANT COLUMN RENDERS THE NOTICE ISSUED U/S 271 AS INVALID. RESPECTFULLY, FOLLOWING THE DECISION OF THE HONBLE AP HIGH COURT CITED SUPRA AND THE DECISION OF THIS TRIBUNAL CITED (SUPRA), WE HOLD THAT THE NOTICE ISSUED U/S 271 IS INVALID AND CONSEQUENT PENALTY IMPOSED BY THE AO IS CANCEL LED. 10 . BY RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF KONCHADA SREERAM (SUPRA) , WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. 11. SO FAR AS CROSS OBJECTION FILED BY THE ASSESSEE IS CONCERNED, IT IS FILED ONLY TO SUPPORT THE ORDER OF THE LD. CIT(A). IN VIEW OF OUR DE CISION IN THE APPEAL FILED BY THE DEPARTMENT, NO SEPARATE ADJUDICATION IS REQUIRED, THEREFORE, SAME IS DISMISSED. 9 ITA NO. 275 /VIZ/2018 C.O.NO. 51/VIZ/2018 ( P. SURYA MANGAPATHI RAJU ) 12. IN THE RESULT, APPEAL FILED BY THE REVENUE AS WELL AS CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT O N TH IS 0 5 T H DAY OF O C T . , 201 8 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 0 5 T H O C T . , 201 8 . VR/ - COPY TO: 1. THE ASSESSEE SURYA MANGAPATHI RAJU PEN METSA, D.NO. 11 - 9 - 6/2, FLAT NO. 90, DASAPALLA HILLS, VISAKHAPATNAM. 2. THE REVENUE JCIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM. 3. THE PR. CIT (CENTRAL), VISAKHAPATNAM. 4. THE CIT(A) - 3, VISAKHAPATNAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.