S. P. Narasimhulu, Bangalore V. ACIT, Bangalore

ITA 1078/BANG/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8812 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-09-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 16-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: H N KHINCHA
• Keywords: Unexplained cash credit; Search and seizure; Wrong claim
• Section: 143(3); 153A; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER SL.NO. ITA NOS. APPELLANT RESPONDENT 1 TO 7 1078 TO 1084 (BNG)/2009 (ASST. YEARS : 1999-2000 TO 2005-06) SHRI S.P. NARASIMHULU, BANGALORE. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), BANGALORE. 8 TO 12 1085 TO 1089(BNG)/2009 (ASST. YEARS : 1999-2000, 2001-02, 2002-03, 2004- 05 & 2005-06) SMT. S. SATYAVATHI, BANGALORE. -DO- 13 TO 16 1074 TO 1077(BNG)/2009 (ASST. YEARS : 2002-03 TO 2005-06) SMT. S. NALINI KUMARI, BANGALORE. -DO- APPELLANTS BY : SHRI H.N. KHINCHA, C.A. RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI, ADDL. CI T. O R D E R PER BENCH : ALL THESE APPEALS ARE FILED BY THE ASSESSES WHO AR E ALSO THE MEMBERS OF THE SAME FAMILY I.E. SMT. SATYAVATHI IS WIFE OF SHRI S. P. NARASIMHULU AND SMT. NALINI KUMARI IS THE DAUGHTER OF SHRI S.P. NARASIMHULU AND SMT. S. SATYAVATHI. ALL THESE APPEALS ARE AGAINST THE ORDERS OF PENALTY UNDER SEC TION 271(1)(C) OF THE INCOME TAX ACT, 1961 AS CONFIRMED BY THE COMMISSIONER OF INCOM E TAX (APPEALS). ITA NOS.1078 TO 1089(BNG)/2009 & 1074 TO 1077(BNG)/2009 - 2 - 2. EXCEPT FOR THE QUANTUM, THE GROUNDS OF APPEAL RA ISED BY ALL THE ASSESSES ARE COMMON AND THEREFORE FOR THE SAKE OF CONVENIENCE TH E GROUNDS OF APPEAL FOR THE ASST. YEAR 1999-2000 RAISED BY SRI S.P. NARASIMHULU ARE R EPRODUCED HEREUNDER : 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PA SSING THE ORDER UNDER SECTION 271(1)( C ) OF THE INCOME TAX ACT, 1961, IN THE MANNER PASSED BY HIM AND THE LEARNED CIT(A) HAD ALSO ERRED IN CONFIR MING THE SAME. 2. THE LEARNED ASSESSING OFFICER HAD ERRED IN ASSUMING JURISDICTION UNDER SECTION 271(1)(C) PF THE INCOME TAX ACT, 1961 . THERE BEING NO PROPER JURISDICTION AT ALL, THE IMPUGNED ORDER IS B AD IN LAW AND IS LIABLE TO BE QUASHED. THE LEARNED CIT(A) HAS INSTEAD OF QUAS HING THE ORDER ERRED IN CONFIRMING THE SAME. 3. IN ANY CASE, WITHOUT PREJUDICE, INITIATION OF PENALTY BASED ON AN ASSESSMENT ORDER WITHOUT A PROPER SATISFACTION NOTE BECOMES BAD IN LAW AND IS LIABLE TO BE QUASHED. 4. THE LEARNED CIT(A) HAS ERRED IN PASSIN G THE APPELLATE ORDER : (I) WITHOUT FULLY APPRECIATING AND CONSIDERING THE CONTENTIONS RAISED BY THE APPELLANT IN THE COURSE OF APPELLATE PROCEEDING S AND BY FILING WRITTEN SUBMISSIONS. (II) HOLDING THAT THE LEGALITY OF A SSESSMENT ORDER IS NOT AN ISSUE DURING PENALTY PROCEEDINGS. THE CONCLUSIONS DRAWN BY THE LEARNED CIT(A) ARE NOT SUPPORTED BY LAW. 5. IN ANY CASE WITHOUT FURTHER PREJUDICE, THE LEARNED ASSESSING OFFICER HAD ERRED IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 AND THE LEARNED CIT(A) HAS ERRED IN C ONFIRMING THE SAME. THE APPELLANT HAD NEITHER CONCEALED THE PARTICULARS OF INCOME NOR HAD HE FURNISHED ANY INACCURATE PARTICULARS OF INCOME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW APPLICABLE, T HE LEVY OF PENALTY IS BAD IN LAW AND SAME IS LIABLE TO BE CANCELLED. 6. IN ANY CASE, THERE IS NO DELIBERATE NOR INTENTIONAL DEFAULT. 7. IN VIEW OF THE ABOVE AND ON OTHER GROUN DS TO BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT IMPUGNED PENA LTY ORDER PASSED BY ASSESSING OFFICER BE QUASHED OR ATLEAST THE PENALTY LEVIED BE CANCELLED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THERE WAS A SEARCH AND SEIZURE ACTION UNDER SECTION 132 ON 23.7.2004 IN THE RESIDENTIAL P REMISES OF THE ASSESSEE SHRI S.P. NARASIMHULU WHO IS ONE OF THE ASSOCIATE OF SHRI G.D .R. REDDY AND DIRECTOR IN M/S. ITA NOS.1078 TO 1089(BNG)/2009 & 1074 TO 1077(BNG)/2009 - 3 - MAHASAI DEVELOPERS PVT. LTD. DURING THE COURSE OF S EARCH, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED WHICH INDICATED VAR IOUS TRANSACTIONS MADE BY THE ASSESSES FOR THE PERIOD FROM 1.4.1998 TO 31.3.2005 . CONSEQUENT TO THE SEARCH, A NOTICE UNDER SECTION 153A WAS ISSUED TO THE ASSESSE E SHRI S.P. NARASIMHULU AND NOTICES UNDER SECTION 153C WERE ISSUED TO SMT. SATY AVATHI AND SMT. NALINI KUMARI AS WELL. IN RESPONSE TO THE SAME, THE RESPECTIVE ASSE SSES FILED THEIR RETURNS OF INCOME. THEREAFTER, AFTER EXAMINING THE SEARCH AND SEIZED M ATERIAL UNDER SECTION 143(3) R.W.S. 153A AND 153C, THE ASSESSING OFFICER MADE ADDITIONS ON ACCOUNT OF ESTIMATED PROFIT ON ASSUMED SALE OF GOLD AND JEWELLERY AND ALSO EXCE SS OF ASSETS OVER LIABILITY IN THE HANDS OF SRI NARASIMHULU AND MADE ADDITION ON ACCOU NT OF UNEXPLAINED CREDITORS UNDER SECTION 68 OF THE ACT IN THE HANDS OF SMT. SATYAVAT HI WHILE IN THE HANDS OF SMT.NALINI KUMARI ADDITIONS WERE MADE ON ACCOUNT OF UNEXPLAINE D INVESTMENT IN MARGADARSI CHIT FUND LTD AND KISAN VIKAS PATRAS. THE ASSESSES THER EIN HAVE ACCEPTED THE SAID ADDITIONS AND DID NOT FILE ANY APPEAL BEFORE THE CI T(A). THEREAFTER THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTIO N 271(1)(C) OF THE I.T. ACT, 1961 AND HELD THAT THE ASSESSES HAVE FAILED TO DECLARE THE S AID INCOME IN THEIR RETURNS OF INCOME FILED SUBSEQUENT TO ISSUE OF NOTICES UNDER S ECTION 153A OR 153C OF THE ACT AND THEREFORE IT AMOUNTS TO CONCEALMENT OF INCOME AND P ENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 IS LEVIABLE. HE ACCORDINGL Y LEVIED MINIMUM PENALTY UNDER SECTION 271(1)(C) OF THE ITA NOS.1078 TO 1089(BNG)/2009 & 1074 TO 1077(BNG)/2009 - 4 - INCOME TAX ACT, 1961. AGGRIEVED THE ASSESSES PREFE RRED APPEALS BEFORE CIT(A) WHO CONFIRMED THE PENALTY AND THE ASSESSES ARE IN SECO ND APPEAL BEFORE US. 4. COMING TO THE CASE OF SHRI S.P. NARASIMHULU, WE FIND THAT BASICALLY THE ADDITIONS MADE IN HIS CASE ARE ON ACCOUNT OF ESTIMATED PROFIT ON ASSUMED SALE OF GOLD AND JEWELLERY AND ALSO ON ACCOUNT OF EXCESS OF ASSETS O VER LIABILIES FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. AS REGARDS THE ESTIMATE D PROFIT ON SALE OF GOLD AND JEWELLERY, WE FIND THAT THE ASSESSEE HAD ADMITTED T HAT THE ASSESSEE SOLD SUCH A SMALL AMOUNT OF GOLD AND JEWELLERY TAKEN FROM THE MEMBERS OF FAMILY. THE ASSESSING OFFICER ASSUMED THAT THE ASSESSEE WOULD HAVE MADE C ERTAIN PROFIT ON SALE OF SUCH GOLD AND JEWELLERY AND MADE ADDITION. AS REGARDS THE E XCESS OF ASSETS OVER LIABILITY, WE FIND THAT THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLI SH THE DIFFERENCE BETWEEN THE ACCOUNTS OF THE ASSESSEE AND THOSE OF THE CREDITORS AND THEREFORE AGREED FOR THE ADDITION. INABILITY OF THE ASSESSEE TO PROVE THE G ENUINENESS OF THE TRANSACTION IS NO DOUBT A CLEAR CASE FOR MAKING ADDITION AND THE ASSE SSEE HAS NOT FILED APPEAL AGAINST THE SAME. HOWEVER, MERE ADDITION IS NOT A GROUND F OR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI H.N. KHINCHA ARGUED THAT THE REVENUE AUTHORITIES HAVE NOT BEEN ABLE TO BRING OUT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS INTENTIONALLY CONCEALED ANY INCOME OR HAS FILED INACCURATE PARTICULARS ITA NOS.1078 TO 1089(BNG)/2009 & 1074 TO 1077(BNG)/2009 - 5 - OF INCOME. HE SUBMITTED THAT THE ADDITIONS WILL NO T AUTOMATICALLY ATTRACT PENALTY AND THEREFORE THE LEVY OF PENALTY IS NOT JUSTIFIABLE. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE JU RISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. M.M. GUJAMGADI REPORTED IN 290 ITR 168, WHEREIN IT WAS HELD THAT THE PENALTY IMPOSED IS NOT JUSTIFIED WHERE THE ASSE SSEE HAS AGREED FOR ADDITION BECAUSE OF THE ASSESSEES INABILITY TO PRODUCE THE CREDITORS IN SPITE OF HER EFFORTS. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE HAS NEVER OFFERED MISCELLANEOUS INCOME AS HIS INCOME IN THE RETURN OF INCOME AND THE PROVISIONS OF SECTION 132(4) HAVE TO BE APPLIED AND THEREFORE THE ASSESSING OFFICER HAS CORRECTLY ASSESSED THE INCOME IN THE HANDS OF THE ASSESSEE. HE SUBMITTED THAT THESE FACTS ABOUT THE ADDITIONAL INC OME HAS COME TO LIGHT ONLY DUE TO THE SEARCH OPERATION CARRIED OUT BY THE REVENUE AUT HORITIES AND IT IS CLEAR THAT THE ASSESSEE HAS CONCEALED HIS INCOME. 7. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE ADDITIONS ARE MAINLY ON ACCOUNT OF ASSESSEE BEING UNABLE TO SUBSTANTIATE HIS CLAIM AS REGARDS THE PROFIT ON SALE OF GOLD AND JEWELLERY AND ALSO AS REGARDS THE DIFFERENCE IN THE ACCOUNTS OF THE ASSESSEE AS WELL AS THE CREDITORS AND IT IS A GOOD GROUND FOR M AKING ADDITION. HOWEVER, WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT EVERY ADDITION WILL NOT AUTOMATICALLY ATTRACT PENALTY. THE PENALTY IS LEVIA BLE WHERE IT IS PROVED THAT THE ITA NOS.1078 TO 1089(BNG)/2009 & 1074 TO 1077(BNG)/2009 - 6 - ASSESSEE HAS MADE A WRONG CLAIM OR HAS FURNISHED IN ACCURATE PARTICULARS. MERE DISALLOWANCE OF A CLAIM WILL NOT AUTOMATICALLY LEAD TO THE CONCLUSION OR EVEN A PRESUMPTION OF CONCEALMENT OR FURNISHING OF INACCUR ATE PARTICULARS OF INCOME. IN THE CASE ON HAND, THE REVENUE AUTHORITIES HAVE NOT BROU GHT OUT ANY INSTANCE OF THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME BY THE ASSESSEE. IN VIEW OF THE SAME, WE ARE OF THE OPINI ON THAT IT IS NOT PROPER TO LEVY THE PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT, 1961. WE ACCORDINGLY DELETE THE PENALTY IMPOSED BY THE AUTHORITIES BELOW. IN THE RESULT THE APPEALS OF ASSESSEE SHRI S.P. NA RASIMHULU ARE ALLOWED. 8. AS REGARDS SMT. S. SATYAVATHI AND SMT. NALINI KU MRI, WE FIND THAT THE PENALTY IS ON ACCOUNT OF ADDITIONS OF INCOME ON ACCOUNT OF THE IR INABILITY TO EXPLAIN THE SOURCE OF THEIR INVESTMENTS IN THE MARGADARSHI CHIT FUND, KVP S AND ALSO THE GENUINENESS OF THE CREDITORS. AS FAR AS SMT. NLINI KUMARI IS CONCERN ED, THE LEARNED COUNSEL SUBMITTED THAT SHE IS THE DAUGHTER OF SHRI S.P. NARASIMHULU AND THE INVESTMENTS WERE MADE IN HER NAME IN MARGADARSI CHIT FUND AND KISAN VIKAS PA TRAS OUT OF THE HUF OF SHRI S.P. NARASIMHULU. AS REGARDS SMT. SATYAVATHI IS CONCERN ED, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITIONS ARE MAINLY ON ACCOUNT OF HER INABILITY TO PRODUCE THE CREDITORS AND SUBSTANTIATE HER CLAIM. HE SUBMI TTED THAT IN BOTH THE CASES, THE REVENUE HAS NOT BEEN ABLE TO BRING OUT ANY EVIDENCE OF THE INTENTION OF THE ASSESSES TO CONCEAL THEIR INCOME OR FURNISHED INACCURATE PARTIC ULARS OF INCOME. ITA NOS.1078 TO 1089(BNG)/2009 & 1074 TO 1077(BNG)/2009 - 7 - 9. THE LEARNED D.R., HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10. AS OBSERVED BY US IN THE CASE OF SHRI S.P. NARASIMHULU EVERY ADDITION WILL NOT AUTOMATICALLY ATTRACT PENALTY. IT HAS TO BE ESTABL ISHED THAT THE ASSESSES HAVE CONCEALED THEIR INCOME OR HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. MERELY NOT AGREEING TO THE CLAIM OF THE ASSESSEE AND MAKING AD DITION WOULD NOT ATTRACT THE PROVISIONS OF SECTION 271(1)( C ) OF THE ACT. WE A RE INCLINED TO DELETE THE PENALTY FOR ALL THE YEARS IN RESPECT OF THESE TWO ASSESSES VIZ. SMT. SATYAVATHI AND SMT. NALINI KUMARI ALSO. 11. IN THE RESULT ALL THE APPEALS OF ASSES SES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPT., 2010 AT BANGALORE. SD/- SD/- (DR. O.K.NARAYANAN) (P. MADHAVI DEVI) VICE PRESIDENT JUDICIAL MEMBER BANGALORE, DT.17.09.2010. COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, BANGALORE. 6. GUARD FILE, ITAT, BANGALORE. * GPR BY ORDER ASSIST ANT REGISTRAR ITA NOS.1078 TO 1089(BNG)/2009 & 1074 TO 1077(BNG)/2009 - 8 - DATE INITIAL 1. DRAFT DICTATED ON SR. P.S. 2. DRAFT PLACED BEFORE AUTHOR SR. P.S. 3. DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER. JM/AM 4. DRAFT DISCUSSED / APPROVED BY THE SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.P.S. SR. P.S. 6. DATE OF PRONOUNCEMENT SR. P.S. 7. FILE SENT TO THE BENCH CLERK SR. P.S. 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER.