D M Corporation Pvt. Ltd., Kolhapur V. Assistant Commissioner of Income-tax,

ITA 110/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0042 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-09-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 22-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM . / ITA NO.110/PUN/2016 / ASSESSMENT YEAR : 2012-13 DM CORPORATION PVT. LTD. 240/B, MOHITE HOUSE GEN. THORAT MARG, TARABAI PARK, KOLHAPUR-416 003 PAN : AADCM6281H /APPELLANT VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLHAPUR . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI RAJEEV KUMAR, CIT / DATE OF HEARING : 06.09.2018 / DATE OF PRONOUNCEMENT: 19.09.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-11, PUNE, DATED 27.11.2015 FOR THE ASSESSMENT YEAR 2012-13. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN CONSTRUCTION OF DEVELOPMENT OF EARTH EN DAMS, HYDROELECTRIC PROJECTS ETC. THERE WAS SEARCH IN THE PRE MISES OF THE ASSESSEE ON 24-08-2011 U/S.132 OF THE ACT. DURING THIS ACTION, A SSESSEE OFFERED ADDITIONAL INCOME OF RS.25 CRORES FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ASSESSEE INCLUDED THE ADDITIONAL INCOME IN TH E RETURNS FILED IN RESPONSE TO NOTICE U/S.153A OF THE ACT AND CLAIMED DE DUCTION U/S.80IA(4) OF THE ACT. HOWEVER, THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S.80IA(4) OF THE ACT AND INITIATED PENALTY PROCEEDINGS U/S .271AAA OF THE ITA NO.110/PUN/2016 DM CORPORATION PVT. LTD. 2 ACT AND EVENTUALLY LEVIED PENALTY OF RS.2,78,48,625/-. IN THE FIRS T APPELLATE PROCEEDINGS, THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO. AGGRIEVED WITH THE CONFIRMATION OF PENALTY, THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS/ADDITIONAL GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON MERIT IN UPHOL DING THE PENALTY UNDER SECTION 271AAA OF RS.2,78,48,625/-WHEN THERE WAS NO UNDISCLOSED INCOME AFTER THE ORDER OF THE CIT (APPEALS). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON MERIT IN UPHOLDING THE PENA LTY ORDER UNDER SECTION 271AAA OF THE INCOME TAX ACT,1961. 3. THE APPELLANT CRAVES FOR LEAVE TO AMEND, MODIFY OR ADD TO ANY OF THE ABOVE GROUNDS OF APPEAL AND /OR TAKE ANY ADDITIONAL GROUN D OF APPEAL, IF NECESSARY. ADDITIONAL GROUNDS : 1. THE ASSESSEE SUBMITS THAT THE PENALTY ORDER PASS ED U/S.271AAA BY THE LEARNED A.O BE DECLARED NULL AND VOID SINCE NO PROP ER SATISFACTION HAS BEEN RECORDED BY THE LEARNED A.O. IN THE ASSESSMENT ORDE R. 2. THE ASSESSEE FURTHER SUBMITS THAT THE NOTICE ISS UED U/S.274 R.W.S.271AAA BY THE LEARNED A.O. IS ALSO INVALID IN LAW SINCE NO IT HAS BEEN ISSUED WITHOUT PROPER APPLICATION OF MIND AND THEREFORE, THE PENAL TY ORDER PASSED U/S.271AAA MAY BE DECLARED BAD IN LAW. THE ASSESSEE SUBMITS THAT THE ADDITIONAL GROUNDS RA ISED ARE LEGAL IN NATURE AND AS ALL THE FACTS ARE ON RECORD, THE ASSESSEE RE QUESTS FOR ADMISSION OF THE ABOVE ADDITIONAL GROUND OF APPEAL. 3. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS A CASE WHERE ACTION U/S.132 OF THE ACT WAS TOOK PLACE ON THE A SSESSEE ON 25-10-2011. ASSESSEE OFFERED THE SUM OF 25 CRORES IN TH E SEARCH ACTION AND FILED THE RETURN OF INCOME. SUBSEQUENTLY, ASSESSEE RE VISED THE INCOME BY DECREASING THE INCOME OFFERED BY THE ASSESSEE DURING THE SEARCH ACTION. HOWEVER, REJECTING THE CLAIM OF THE ASSESSEE, THE AO MADE ADDITION OF THE SAME AND INITIATED PENALTY PROCEEDINGS U/S.271AAA OF THE A CT. BRINGING OUR ATTENTION TO THE ADDITIONAL GROUND FILED BY THE ASSESSEE, LD. COUNSEL SUBMITTED THAT THE AO FAILED TO RECORD PROPER SATISFACTION WHILE INITIATING THE PENALTY. LD. COUNSEL SUBMITTED THAT UNDISCLOSED INCOME IS THE ITA NO.110/PUN/2016 DM CORPORATION PVT. LTD. 3 ESSENCE OF THE PENALTY U/S.271AAA OF THE ACT AND DREW O UR ATTENTION TO THE DEFINITION OF UNDISCLOSED INCOME. THIS SECTION APPLIES TO THE CASES COVERED BY THE SEARCH ACTION INITIATED ON OR AFTER 01-0 6-2007 BUT BEFORE 01-07-2012 AND THE LIMBS OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE NOT BORNE OUT OF THE PROVISIONS. HE DREW OUR ATTENTION TO PARA NO.10 OF THE ASSESSMENT ORD ER WHERE SATISFACTION WAS RECORDED BY THE AO INITIATING PENALTY PRO CEEDINGS U/S.271AAA OF THE ACT. THE LAST SENTENCES OF THE PARA READ AS UNDER : 10. ..................... ................SINCE THE ASSESSEE HAS CONCEALED THE PARTICULAR OF INCOME, PENAL PROCEEDINGS U/S.271AAA OF THE I.T. ACT, ARE INITIATED SEPARATELY. FURTHER, HE BROUGHT OUR ATTENTION TO THE PENALTY ORDER DATED 02-03-2015 AND HIGHLIGHTED THE FACT THAT THE PENALTY WAS LEVIABLE FOR T HE REASON THAT UNDISCLOSED INCOME WAS DETECTED AND UNEARTHED BY T HE DEPARTMENT BY WAY OF ACTION U/S.132 OF THE ACT . CONTENTS OF PARA NO.9 OF THE PENALTY ORDER ARE RELEVANT. THUS, LD. COUNSEL SUMMED UP THAT THIS IS A CASE WHERE THE AO INITIATED THE PENALTY PROCEEDINGS FOR THE DEFAULT OF CONCEALING THE PARTICULARS OF INCOME AND THE PENALTY WAS ACTUALLY LEVIED FOR UNDISCLOSED INCOME DETECTED BY THE REVENUE BY WAY OF ACTION U/S.132 OF THE ACT . LD. COUNSEL SUMMED UP BY STATING THAT THE PENALTY INITIATION SUFFERS FROM AMBIGUITY IN THE MIND OF THE AO. 4. REFERRING TO THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE WHICH ARE LEGAL IN NATURE, LD. COUNSEL SUBMITTED THAT THE ADDITIONAL G ROUNDS RAISED BY THE ASSESSEE SHOULD BE ADMITTED FOR ADJUDICATION AS N O FRESH FACTS ARE REQUIRED TO BE INVESTIGATED AND ALL THE MATERIAL FACTS ARE AVAILABLE ON RECORD. FOR THIS PROPOSITION, LD. COUNSEL RELIED ON VARIOUS DECISIONS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NTPC LTD. ITA NO.110/PUN/2016 DM CORPORATION PVT. LTD. 4 VS. CIT REPORTED IN 229 ITR 383, THE DECISION IN THE CAS E OF JUTE CORPORATION OF INDIA REPORTED IN 187 ITR 688 AND THE DEC ISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF AHMEDABAD ELECTRICITY C OMPANY REPORTED IN 199 ITR 351. 5. IN SUPPORT OF HIS CONTENTIONS, LD. COUNSEL BROUGHT OU R ATTENTION TO THE ORDER OF TRIBUNAL IN THE CASE OF ACIT VS. SHRI VIKAS BA URAO TAKAWANE IN ITA NO.2245/PUN/2014, DATED 26-07-2017 AND SUBMITTED THAT SIMILAR ISSUE CAME UP FOR ADJUDICATION BEFORE THE TRIBUNAL. IN THIS CASE, THE TRIBUNAL HELD THAT SUCH INITIATION AND LEVY OF PENALTY AMOUNT S TO EXISTENCE OF AMBIGUITY IN THE MIND OF THE AO. LD. COUNSEL RELIED ON TH E CONTENTS OF PARA NOS. 6 AND 7 OF THE SAID ORDER OF TRIBUNAL (SUPRA). 6. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED HEA VILY ON THE ORDERS OF THE AO/CIT(A). 7. WE HEARD BOTH THE SIDES AND PERUSED THE ORDERS OF THE REVENUE. WE HAVE ALSO CONSIDERED THE DECISION RELIED ON BY THE LD. COU NSEL IN THE CASE OF SHRI VIKAS BAPURAO TAKAWANE (SUPRA) AND THE ARGUMENT S ON THE ADDITIONAL GROUNDS RAISED BY HIM. ON GOING THROUGH THE FAC TS OF THE CASE NARRATED ABOVE, WE ARE OF THE OPINION THAT THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE REQUIRED TO BE ADMITTED FOR ADJUDICATIO N BY VIRTUE OF BINDING DECISIONS ON THE SAME. WE PROCEED TO ADJUDICATE THE CORE ISSUE OF PENALTY LEVIED BY THE AO U/S.271AAA OF THE ACT AND CONF IRMED BY THE CIT(A) ON THE ADDITIONAL GROUNDS FIRST. 7.1 ON SATISFACTION ISSUE, WE FIND THE AO INITIATED THE PENALTY PROCEEDINGS U/S.271AAA OF THE ACT FOR THE DEFAULT OF CONCEALING THE PARTICULARS OF INCOME WHEREAS THE PENALTY WAS ACTUALLY LEVIED FOR UNDISCLOSED INCOME DETECTED BY THE REVENUE BY WAY OF ACTION ITA NO.110/PUN/2016 DM CORPORATION PVT. LTD. 5 U/S.132 OF THE ACT . THIS MANNER OF RECORDING OF SATISFACTION SUGGESTS THE EXISTENCE OF AMBIGUITY IN THE MIND OF THE AO AND THE R ESULTANT PENALTY ORDER IS UNSUSTAINABLE IN LAW LEGALLY. AO IS UNDER OBLIGATION TO SPECIFY THE CORRECT DEFAULT AT THE TIME OF INITIATION AS WELL AS AT THE T IME OF LEVY OF PENALTY UNIFORMLY. FOR THIS PROPOSITION, WE RELY ON THE B INDING JUDGMENTS IN THE CASE CIT VS. SHRI SAMSON PERINCHERY (2017) 392 ITR 4 (BOM.) AS WELL AS THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565. 8. FURTHER, WE HAVE PERUSED THE ORDER OF PUNE BENCH O F THE TRIBUNAL IN THE CASE OF SHRI VIKAS BAPURAO TAKAWANE (SUPRA). IN THIS CASE, WE FIND THE TRIBUNAL HAD AN OCCASION TO DEAL WITH AN IDENTICAL ISSUE. CON TENTS OF PARA NO.6 AND 7 OF THE SAID ORDER ARE RELEVANT. WE THEREFORE PROCEED TO EXTRACT THE SAID PARAGRAPHS BELOW FOR THE SAKE OF COMPLETENESS OF THE ORDER. 6. A BARE PERUSAL OF SECTION 271AAA SHOWS THAT TH E PENALTY IS LEVIED IN RESPECT OF UNDISCLOSED INCOME. THE EXPRESSION UNDI SCLOSED INCOME HAS BEEN DEFINED IN EXPLANATION TO SECTION 271AAA OF THE ACT . PENALTY U/S. 271AAA IS NOT LEVIED FOR CONCEALMENT OF INCOME AND/OR FURNISH ING OF INACCURATE PARTICULARS OF INCOME. A PERUSAL OF ASSESSMENT ORDE R SHOWS THAT THE ASSESSING OFFICER WHILE RECORDING SATISFACTION FOR LEVYING PENALTY U/S.271AAA HAS CATEGORICALLY STATED THAT THE PENALTY PROCEEDIN GS ARE INITIATED FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. THUS, IT IS EVIDENT THAT THE ASSESSING OFFICER WAS NOT CLEAR IN HIS MIND WHILE RECORDING SATISFACTION WHETHER THE PENALTY IS TO BE LEVIED UNDER THE PROVISIONS OF SECTION 271(1)(C) OR THE PROVISIONS OF SECTION 2 71AAA OF THE ACT. SIMILARLY, IN THE ORDER LEVYING PENALTY U/S.271AAA, THE ASSESS ING OFFICER LEVIED PENALTY FOR CONCEALMENT OF INCOME. THERE IS NO REFERENCE OF UNDISCLOSED INCOME EITHER IN THE ASSESSMENT ORDER OR THE ORDER LEVYING PENALTY U/S. 271AAA OF THE ACT. THE UNDISCLOSED INCOME AS DEFINED IN EXP LANATION TO SECTION 271AAA MEANS ANY INCOME REPRESENTED EITHER WHOLLY O R PARTLY BY ANY MONEY, BULLION, JEWELRY OR OTHER VALUABLE ARTICLE O R THINGS OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF SEARCH WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT OR DISCLOSED TO THE DESIGNATED INCOME TAX AUTHORITY BEFORE THE DATE OF SEARCH. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS FAILED TO SPECIFY T HE UNDISCLOSED INCOME UNEARTHED DURING THE SEARCH AS ENVISAGED UNDER THE PROVISIONS OF SECTION 271AAA OF THE ACT. 7. THE MANNER IN WHICH THE ENTIRE PENALTY PROCEEDINGS ARE CONDUCTED RIGHT FROM INITIATION TO THE ORDER LEVYING PENALTY, INCLUDING ISSUANCE OF NOTICE SHOWS THAT THERE WAS AMBIGUITY AND VAGUEN ESS IN THE MIND OF ASSESSING OFFICER WITH REGARD TO THE CHARGE AND THE PROVISIONS UNDER WHICH PENALTY IS TO BE LEVIED. AS A RESULT, THE NOTICE LEVYING PENALTY ITA NO.110/PUN/2016 DM CORPORATION PVT. LTD. 6 IS ALSO AMBIGUOUS AND HENCE BAD IN LAW. WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER DELETING PENALTY U/S.271AAA OF T HE ACT. WE CONCUR WITH THE REASONS GIVEN BY COMMISSIONER OF IN COME TAX (APPEALS) IN DELETING THE PENALTY. THE IMPUGNED ORDER IS UPHELD AND THE APPEAL OF THE REVENUE IS DISMISSED. IN VIEW OF THE ABOVE DELIBERATION ON THIS ISSUE, WE ARE OF T HE OPINION THAT THE PENALTY ORDER IS LIABLE TO BE QUASHED ON THIS LEGAL ISSU E ITSELF. THUS, WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO D ELETE THE PENALTY. ACCORDINGLY, THE ADDITIONAL GROUNDS OF APPEAL RELATING TO T HE LEGAL ISSUE ARE ALLOWED ON TECHNICAL GROUNDS WITHOUT GOING INTO THE MERITS OF THE ISSUE . 9. SINCE WE HAVE ALLOWED THE ADDITIONAL GROUNDS (LEGAL IN NA TURE) ADJUDICATION OF REGULAR GROUNDS ON MERITS BECOMES ACADEM IC IN NATURE. THEREFORE, THE GROUNDS RAISED BY THE ASSESSEE ON MERITS ARE DISMISS ED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D ON TECHNICALITIES. ORDER PRONOUNCED ON THIS 19 TH DAY OF SEPTEMBER, 2018. SD/- SD/- (SUSHMA CHOWLA) (D.KARU NAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 19 TH SEPTEMBER, 2018. SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-11, PUNE. 4. / THE CIT, CENTRAL, PUNE. 5. , , / DR A, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.