Hemant Shivaji Sanap, Nashik V. I,

ITA 1065/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7234 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 20-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Initiation of penalty proceedings
• Section: 40A(3); 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1065/PUN/2014 [ [ / ASSESSMENT YEAR : 2008-09 SHRI HEMANT SHIVAJI SANAP, 01, JAMIN APARTMENT, BOODHALE NAGAR, NASHIK 422006. PAN : BKYPS5135D. . / APPELLANT V/S INCOME TAX OFFICER, WARD 2(1), NASHIK. . / RESPONDENT . / ITA NO.1213/PUN/2014 [ [ / ASSESSMENT YEAR : 2008-09 INCOME TAX OFFICER, WARD 2(1), NASHIK. . / APPELLANT V/S SHRI HEMANT SHIVAJI SANAP, 01, JAMIN APARTMENT, BOODHALE NAGAR, NASHIK, PUNE ROAD, NASHIK. PAN : BKYPS5135D. . / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI. REVENUE BY : SHRI MUKESH JHA, JCIT. / ORDER PER ANIL CHATURVEDI, AM : THESE CROSS-APPEALS FILED BY ASSESSEE AND REVENUE ARE EMANATING OUT OF ORDER OF COMMISSIONER OF INCOME-TAX (A) II, NASHIK DT.18.03.2014 FOR A.Y. 2008-09. / DATE OF HEARING : 16.08.2017 / DATE OF PRONOUNCEMENT: 31 .10.2017 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL STATED TO BE DERIVING INCOME FROM PARTNERSHIP FIRM AND OTHER SOURCES. ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y. 2008-09 ON 31.03.2010 DECLARING TOTAL INCOME OF RS.88,950/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 27.12.2010 AND THE TOTAL INCOME WAS DETERMINED AT RS.27,16,604/- BY INTER-ALIA MAKING THE FOLLOWING ADDITIONS : I) ADDITION ON ACCOUNT OF UNEXPLAINED SOURCE OF INCOME FOR CASH DEPOSITS INTO THE SAVING BANK ACCOUNT RS.21,85,231/- II) ADDITION ON ACCOUNT OF UNEXPLAINED SOURCE OF INCOME FOR CHEQUE DEPOSITS INTO THE SAVING BANK ACCOUNT RS.3,32,423/- III) ADDITION U/S 40A(3) OF THE ACT RS.1,10,000/- TOTAL ADDITION : RS.27,16,604/- ON THE AFORESAID ADDITIONS, AO VIDE ORDER DT.29.10.2012 LEVIED PENALTY OF RS.10,05,896/- (BEING 200% OF CONCEALED INCOME) U/S 271(1)(C) OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A), WHO UPHELD THE LEVY OF PENALTY, BUT, HOWEVER RESTRICTED THE PENALTY AT 100% OF THE TAX AS AGAINST 200% APPLIED BY THE AO. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. THE GROUNDS RAISED BY THE REVENUE IN APPEAL NO.1213/PUN/2014 READS AS UNDER: 1. THE ORDER OF LD.CIT(A)-II, NASHIK IS ERRONEOUS ON POINT OF LAW AS WELL AS ON FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT(A)-II, NASHIK WAS NOT JUSTIFIED IN REDUCING THE PENALTY LEVIED BY THE AO FROM 200% TO 3 100% I.E., FROM RS.20,11,792/- TO RS.10,05,896/- WHICH WAS LEVIED ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME AND CANCELLING THE TAXABLE INCOME AS PER THE PROVISION OF SECTION 271(1)(C) I.T. ACT. IN THIS CASE THE ASSESSEE WAS UNABLE TO EXPLAIN THE SOURCES OF CASH DEPOSITS BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE LD.CIT(A). THIS ITSELF JUSTIFIES THE LEVY OF PENALTY BY THE AO. 3. THE ORDER OF THE ASSESSING OFFICER MAY KINDLY BE RESTORED. 3. ON THE OTHER HAND, THE GROUNDS RAISED BY THE ASSESSEE IN APPEAL NO.1065/PUN/2014 READS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A)-NASHIK WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT BUT AT THE SAME TIME TO REDUCING THE SAME TO 100% AS AGAINST LEVIED OF 200% OF THE TAX SOUGHT TO BE EVADED. BASICALLY THE AUTHORITIES BELOW HAVE NOT RECORDED ANY FINDING THAT THE EXPLN. 1 TO SEC.271(1)(C) READ WITH CL.(A) AND CL.(B) WERE ATTRACTED. IN THE ABSENCE OF THIS THE PENALTY WAS NOT JUSTIFIED. IT BE CANCELLED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE ADDITION OF RS. 21,85,231/- WAS MADE BY THE A. O. ONLY ON THE GROUND THAT THE AGREEMENTS ON THE BASIS OF WHICH THE AMOUNTS WERE RECEIVED WERE NOT NOTORISED AND HENCE NOT GENUINE. THE AO FAILED TO PROVE WITH COGENT EVIDENCE THAT THE AGREEMENTS IN QUESTION WERE NOT GENUINE. IN THIS VIEW OF THE MATTER NO PENALTY U/S 271(1)(C) CAN BE LEVIED AND SUSTAINED UNLESS THE GUILT OF CONCEALMENT OR FILING OF INACCURATE PARTICULARS ARE PROVED. THE PENALTY LEVIED AND SUSTAINED IS ILLEGAL AND WITHOUT JURISDICTION. IT BE QUASHED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE PENALTY LEVIED INVOKING SEC.271(1)(C) WITHOUT EXPLN. 1 IS PREMATURE SINCE APPEAL OF THE ASSESSEE IN QUANTUM PROCEEDINGS IS PENDING BEFORE ITAT, PUNE. S. 275(1)(A) APPLIED. IN VIEW OF THIS ALSO THE PENALTY IS NOT SUSTAINABLE. IT BE QUASHED. 4. SINCE THE GROUNDS RAISED BY THE ASSESSEE AND REVENUE ARE INTER- CONNECTED, BEING IN RELATION TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, BOTH THE APPEALS ARE CONSIDERED TOGETHER. 5. BEFORE US, LD.D.R. TOOK US THROUGH THE ORDER OF AO AND POINTED TO THE FINDINGS OF AO. HE FURTHER SUBMITTED THAT AO HAD MADE ADDITION TO THE EXTENT OF RS.26,27,654/-. WHEN THE MATTER WAS CARRIED BEFORE LD.CIT(A), ENHANCEMENT WAS MADE AND THE TOTAL INCOME WAS DETERMINED AT RS.30,40,440/-. THE ASSESSEE HAS CONCEALED THE INCOME TO THE EXTENT OF RS.30,40,440/- AND HAD THE CASE OF THE ASSESSEE NOT BEEN SELECTED FOR SCRUTINY, THE AMOUNT WOULD HAVE GONE 4 UNTAXED. HE FURTHER SUBMITTED THAT IN THE PRESENT CASE IT WAS A DELIBERATE ATTEMPT ON THE PART OF THE ASSESSEE TO CONCEAL THE INCOME WHICH WAS FOUND BY AO AND FURTHER CONFIRMED BY LD.CIT(A). HE FURTHER SUBMITTED THAT THE CONCEALMENT MADE BY THE ASSESSEE WAS NOT DUE TO ANY TECHNICAL MISTAKE BUT IT WAS WITH A MALAFIDE INTENTION. HE THEREFORE SUBMITTED THAT IN THE PRESENT CASE THE AO HAD RIGHTLY LEVIED THE PENALTY AT 200% AND LD.CIT(A) SHOULD HAVE NOT REDUCED THE PENALTY TO 100%. HE THUS SUPPORTED THE ORDER OF AO. 6. LD.A.R. ON THE OTHER HAND, SUBMITTED THAT IN THE PRESENT THE ENTIRE PENALTY LEVIED AND CONFIRMED BY THE LD.CIT(A) NEEDS TO BE DELETED. HE SUBMITTED THAT UNDER THE PROVISIONS OF SEC.271(1)(C) OF THE ACT, IT IS INCUMBENT ON THE AO TO RECORD SATISFACTION TO THE EFFECT AS TO WHETHER THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. HE SUBMITTED THAT IN THE ASSESSMENT ORDER AO IS NOT CLEAR AS TO WHICH LIMB THE PENALTY IS LEVIABLE AND HE HAS LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME AND IN THE ABSENCE OF THE RECORDING OF SUCH SATISFACTION, THE INITIATION OF PENALTY PROCEEDINGS IS INVALID. 7. HE FURTHER SUBMITTED THAT WHILE PASSING THE PENALTY ORDER U/S 271(1)(C) OF THE ACT, THE AO HAS LEVIED PENALTY FOR CONCEALMENT OF INCOME AS WELL AS FOR FURNISHING INACCURATE PARTICULARS OF INCOME. HE RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMSON PERINCHERY (ITA NO.1154 OF 2014 ORDER DT.05.01.2017), SUBMITTED THAT WHEN INITIATION OF PENALTY IS FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND PENALTY WAS LEVIED ON CONCEALMENT OF INCOME, THEN IN THE ABSENCE OF PROPER SHOW CAUSE 5 NOTICE TO ASSESSEE, PENALTY U/S 271(1)(C) CANNOT BE LEVIED. HE THEREFORE SUBMITTED THAT PENALTY LEVIED BY AO BE DELETED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN THE PRESENT CASE, PENALTY HAS BEEN LEVIED ON THE VARIOUS ADDITIONS MADE BY THE AO. THE PERUSAL OF ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT REVEALS THAT AO HAD INITIATED PENALTY PROCEEDING BUT NO SATISFACTION WAS RECORDED WHILE PASSING THE ASSESSMENT ORDER. THEREAFTER IN THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT, AO HELD THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME AND HAD CONCEALED THE INCOME U/S 271(1)(C) OF THE ACT. IT IS A SETTLED LAW THAT WHILE LEVYING PENALTY FOR CONCEALMENT, THE AO HAS TO RECORD SATISFACTION AND THEREAFTER COME TO A FINDING IN RESPECT OF ONE OF THE LIMBS, WHICH IS SPECIFIED UNDER SECTION 271(1)(C) OF THE ACT. THE FIRST STEP IS TO RECORD SATISFACTION WHILE COMPLETING THE ASSESSMENT AS TO WHETHER THE ASSESSEE HAD CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THEREAFTER, NOTICE U/S 274 READ WITH SECTION 271(1)(C) OF THE ACT IS TO BE ISSUED TO THE ASSESSEE. THE ASSESSING OFFICER THEREAFTER HAS TO LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR NON-SATISFACTION OF EITHER OF THE LIMBS. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HAS TO COME TO A FINDING AS TO WHETHER THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE HONBLE BOMBAY HIGH COURT IN CIT VS. SHRI SAMSON PERINCHERY IN ITA NO.1154 OF 2014 WITH OTHER ITA NOS.953 OF 2014, 1097 OF 2014 AND 1226 OF 2014, VIDE JUDGMENT DATED 05.01.2017 HELD THAT WHERE INITIATION OF PENALTY IS ONE LIMB AND THE LEVY OF PENALTY IS ON OTHER LIMB, THEN IN THE 6 ABSENCE OF PROPER SHOW CAUSE NOTICE TO THE ASSESSEE, THERE IS NO MERIT IN LEVY OF PENALTY. 9. IN THE PRESENT CASE, AS NOTED HEREINABOVE, IT IS SEEN THAT THE AO HAS NOT RECORDED ANY SATISFACTION FOR LEVY OF PENALTY IN THE ASSESSMENT ORDER BUT HAD LEVIED PENALTY ON BOTH THE LIMBS I.E., FOR CONCEALMENT OF INCOME AND FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME WHILE PASSING THE PENALTY ORDER. CONSIDERING THE AFORESAID FACTS IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SAMSON PERINCHERY (SUPRA), WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE BASIC CONDITION FOR LEVY OF PENALTY HAS NOT BEEN FULFILLED AND THAT THE PENALTY ORDER SUFFERS FROM NON-EXERCISING OF JURISDICTION POWER OF AO AND THEREFORE PENALTY ORDER CANNOT BE UPHELD. WE ACCORDINGLY SET ASIDE THE PENALTY ORDER PASSED BY AO. THUS, THE GROUND OF ASSESSEE IS ALLOWED. SINCE THE GROUND OF ASSESSEE IS ALLOWED, THE GROUNDS RAISED BY REVENUE AGAINST THE REDUCTION OF LEVY OF PENALTY FROM 200% TO 100% ALSO DOES NOT SURVIVE AND THEREFORE THE GROUND OF REVENUE IS ALSO DISMISSED. 10. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED AND THAT OF THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 31 ST DAY OF OCTOBER, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 31 ST OCTOBER, 2017. YAMINI 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. 6. CIT(A)-II, NASHIK. CIT-II, NASHIK. , , / DR, ITAT, A PUNE; [ / GUARD FILE. / BY ORDER , // TRUE COPY // / TRUE COPY / / / SR. PRIVATE SECRETARY , / ITAT, PUNE