M/s. Kankoo Paints Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 1123/PUN/2016

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 0725 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-10-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Earning of tax free income; Initiation of penalty proceedings; Revised return
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . , , , ' BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NO.1123/PUN/2016 / ASSESSMENT YEAR : 2009-10 M/S. KANKOO PAINTS PVT. LTD., C/O. MR. D.Y. PANDIT, ADV 1187/10, KRUPA, SHIVAJINAGAR, PUNE 411 005 PAN : AAACK8698R /APPELLANT VS. DCIT, CIRCLE-11(1), PUNE . / RESPONDENT / APPELLANT BY : SMT. DEEPA KHARE / RESPONDENT BY : SHRI SUDHENDU DAS / DATE OF HEARING : 01.10.2018 / DATE OF PRONOUNCEMENT: 03.10.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF C IT(A)-7, PUNE, DATED 05-02-2016 FOR THE ASSESSMENT YEAR 2009-10. 2. BRIEFLY STATED RELEVANT FACTS OF THE ASSESSEE INCLUDE T HAT IT IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF INDUS TRIAL PAINTS AND THINNERS. ASSESSEE FILED THE RETURN OF INCOME ON 19-0 9-2009 DECLARING TOTAL INCOME OF RS.1,11,68,411/-. BASED ON THE INFORMATION RE CEIVED FROM DG INVESTIGATION, PUNE, REGARDING THE HAWALA TRANSACTIONS , THE AO ISSUED NOTICE U/S.148 DATED 22-03-2013 ON THE ASSESSEE. IT W AS NOTICED BY THE AO THAT THE ASSESSEE MADE PURCHASES FROM COUPLE OF SUP PLIERS WHO ARE IN THE SUSPECTED LIST OF HAWALA DEALERS, THE DETAILS OF WHICH ARE GIVEN BELOW : ITA NO.1123/PUN/2016 M/S. KANKOO PAINTS PVT. LTD., 2 SR.NO. NAME OF THE PARTY SUPPLYING BOGUS BILLS AMOUNT 1 INTERNATIONAL TRADE AGENCY 20,280/- 2 NAMRATA TRADING CO. 4,29,520/- IN RESPONSE TO NOTICE U/S.148, ASSESSEE FILED REVISED RET URN SHOWING THE AMOUNT OF RS.4,49,800/- AND THE SAME WAS ACCEPTED BY TH E DEPARTMENT PROPOSING NO ADDITION. HOWEVER, THE AO MADE ADDITION OF RS .1,21,114/- ON ACCOUNT OF EXEMPT INCOME SINCE THE SAME IS UNSUPPORTED BY ANY DOCUMENTARY EVIDENCE. PENALTY PROCEEDINGS U/S.271(1)(C) WER E INITIATED FOR CONCEALING AND FURNISHING INACCURATE PARTICULARS OF INCOME. E VENTUALLY, THE AO LEVIED THE PENALTY OF RS.1,94,054/- ON BOTH THE ITEM S (I.E. RS.4,49,800 AND RS.1,21,114/-) MENTIONED ABOVE. 3. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO. CONTENTS OF PARA NOS. 9 AND 9.2 OF THE ORDER OF CIT(A) ARE RELEVANT. AGGRIEVED WITH THE SAME, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL CHALLENGING THE CONFIRMATION OF PENALTY WIT H THE FOLLOWING GROUNDS : 1. THE LD.CIT(A) PUNE HAS ERRED IN CONFIRMING THE PENALTY OF RS.1,94,054/- LEVIED U/S.271(1)(C) AS IT IS BAD IN LAW & AGAINST THE FACTS AND CIRCUMSTANCE OF THE CASE. 2. THE LD.CIT(A) PUNE FAILED TO CONSIDER THE FACT T HAT A.O. HAS NOT BROUGHT ANY EVIDENCE TO SHOW THAT THE ASSESSEE HAS CONSCIOU SLY CONCEALED ANY PARTICULAR OF INCOME OR GAVE INACCURATE PARTICULARS OF INCOME & SO AS TO JUSTIFY LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT, 1961 . 3. (A) A.O. AS WELL AS CIT(A) FAILED TO PROVE THAT THERE WAS A DELIBERATE & MALAFIDE INTENTION BEING CONCEALING THE INCOME BY T HE ASSESSEE. (B) THERE IS NO FINDING EITHER BY THE A.O. OR BY CI T(A) THAT THE EXPLANATION OFFERED BY THE ASSESSEE OR GIVEN ON BEH ALF OF ASSESSEE IS FALSE OR NOT BONAFIDE OR IT IS NOT A PLAUSIBLE EXPL ANATION. 4. THE APPELLANT MAY BE PERMITTED TO AMEND OR ALTER ANY OF THE ABOVE GROUND OF APPEAL OR ADD A NEW GROUND OF APPEAL ANY TIME BEFORE THE HEARING OF APPEAL OR DURING THE COURSE OF APPEAL HEARING. ITA NO.1123/PUN/2016 M/S. KANKOO PAINTS PVT. LTD., 3 4. AT THE OUTSET, IN THE PROCEEDINGS BEFORE US, LD. COUN SEL FOR THE ASSESSEE RAISING THE ORAL GROUND RELATING TO RECORDING OF SATISFACTION BY THE AO AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS, AND SUB MITTED THAT THIS IS A CASE WHERE THE AO FAILED TO RECORD VALID SATISFACTION IN THE ASSESSMENT ORDER AS WELL AS DURING THE LEVY OF PENALTY U/S. 271(1) OF THE ACT. HIGHLIGHTING THE LEGAL REQUIREMENT OF MAKING A SPECIFIC REFERENC E TO THE SPECIFIC LIMB OF CLAUSE (C) OF SECTION 271(1) OF THE ACT AND RELY ING ON VARIOUS BINDING 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 I TR 565, LD. COUNSEL DEMONSTRATED THAT THE PENALTY LEVIED BY THE AO AND CONFIRMED BY THE CIT(A) IS UNSUSTAINABLE IN LAW. IN THIS RE GARD, HE BROUGHT OUR ATTENTION TO THE ASSESSMENT ORDER AS WELL AS THE P ENALTY ORDER HIGHLIGHTING THE ABOVE LEGAL DEFICIENCIES. 5. PER CONTRA, LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF AO/CIT(A). 6. ON HEARING BOTH THE PARTIES ON THE ISSUE OF APPLICABILITY OF LIMB, SATISFACTION THEREOF IN MATTERS RELATING TO PENALTY U/S.271 (1)(C) OF THE ACT, WE FIND THE AO MADE ADDITION OF RS.1,21,114/- INVOKING THE PR OVISIONS OF SECTION 147 OF THE ACT AND INITIATED THE PENALTY PROCEED INGS SAYING ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCO ME BY FURNISHING INACCURATE PARTICULARS THEREOF . CONTENTS OF PARA NO.4.6 OF THE ASSESSMENT ORDER ARE RELEVANT. WHILE MAKING THE ASSESSM ENT AS PER THE REVISED RETURN OF INCOME, THE AO NOTICED THAT THE REVISION WAS REQUIRED CONSIDERING THE NEED FOR OFFERING ADDITIONAL INCOME OF RS.4,49 ,800/- ON ACCOUNT OF ALLEGED BOGUS PURCHASES. IN THIS REGARD, THE PENALTY WAS INITIATED VIDE THE CONTENTS OF PARA NO.3.1 OF THE ASSESSMEN T ORDER BY STATING ITA NO.1123/PUN/2016 M/S. KANKOO PAINTS PVT. LTD., 4 THEREFORE, IT IS CLEAR THAT THE ASSESSEE HAS CONCE ALED AND FURNISHED INACCURATE PARTICULARS OF HIS INCOME . SUBSEQUENTLY, THE PENALTY WAS LEVIED ON THE SAID ADDITIONAL INCOME FOR THE DEFAULT ASSESSEE HAS CONCEALED INCOME TO THE EXTENT OF RS.4,49,800/- BY WAY OF CLAIMING BOGU S PURCHASES AND OF RS.1,21,114/- BY WAY OF CLAIMING EXCESS E XPENSES WHICH ARE REQUIRED TO HAVE BEEN DISALLOWED UNDER RULE 8D OF THE I.T. RULE BY FURNISHING INACCURATE PARTICULARS OF ITS INCOME AND MADE ITSELF LIABLE FOR LEVY OF PENALTY U/S.271(1)(C) OF THE ACT........... (PARA NO.6 OF THE PENALTY ORDER). CONSIDERING THE ABOVE FACTS, WE ARE OF THE OPINION THAT THIS IS A CASE WHERE THE AO INVOKED BOTH THE LIMBS AT THE TIME OF INITIATI ON AS WELL AS LEVYING THE PENALTY. THUS, THE SATISFACTION SUFFERS FROM AMBIG UITY IN THE MIND OF THE AO. THEREFORE, WE ARE OF THE OPINION THAT, CONSIDERING THE ABO VE REFERRED BINDING JUDGMENTS, SUCH PENALTY ORDER IS UNSUSTAINABLE IN LA W LEGALLY. IT IS A SETTLED LEGAL PROPOSITION THAT THE AO IS UNDER OBLIGATION TO SPECIFY THE APPROPRIATE LIMB OF CLAUSE (C) OF SECTION 271(1) OF THE ACT AT THE TIME OF INITIATION AS WELL AS AT THE TIME OF LEVY OF PENALTY. IN VIEW OF THE ABOVE DELIBERATION ON THIS ISSUE, WITHOUT GOING INTO THE MERITS OF T HE PENALTY, WE ARE OF THE OPINION THAT THE PENALTY ORDER IS LIABLE TO BE QUASHED ON THIS LEGAL ISSUE. THUS, THE ORDER OF CIT(A) IS SET-ASIDE AND DIRECT T HE AO TO DELETE THE PENALTY ON TECHNICAL GROUNDS. 7. SINCE WE HAVE ALLOWED THE ORAL GROUND RAISED BY THE AS SESSEE, IN OUR VIEW, ADJUDICATION OF GROUNDS RAISED BY THE ASSESSEE IN TH E APPEAL ON MERITS BECOMES AN ACADEMIC EXERCISE. THEREFORE, THE SAID GROUND IS DISMISSED AS ACADEMIC. ITA NO.1123/PUN/2016 M/S. KANKOO PAINTS PVT. LTD., 5 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED ON TECHNICALITIES. ORDER PRONOUNCED ON THIS 03 RD DAY OF OCTOBER, 2018. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 03 RD OCTOBER, 2018. SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-7, PUNE. 4. / THE PR.CIT-6, PUNE. 5. , , / DR B, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.