M/s Modak Jewellery House, Bokaro V. ACIT, Bokaro

ITA 116/RAN/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9594 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 13-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 271(1)(c)

Judgement Text

1 ITA NO. 115&116 /RAN/ 201 6 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S.SAINI , ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE , JUDICIAL MEMBER ITA NO. 115 /RAN/201 6 A .Y. : 20 0 9 - 20 10 M/S MODAK JEWELLERS, PROP: RAMDAS DEY MODAK, BYE PASS ROAD, BOKARO V S A CIT, CIRCLE - 3, BOKARO P AN NO. : A DKPM 3323 M (APPELLANT ) . RESPONDENT AND ITA NO.116/RAN/2016 A.Y. : 2009 - 2010 M/S MODAK JEWELLERS HOUSE, CHAS, BOKARO V S ACIT, CIRCLE - 3, BOKARO P AN NO. : AAOFM 6882 E (APPELLANT ) . RESPONDENT ASSESSEE BY : NONE REVENUE BY :SHRI A.K.MOHANTY , JCIT DATE OF HEARING : 2 5 . 05 .201 8 DATE OF PRONOUNCEMENT : 28.05 .201 8 O R D E R PER PAVAN KUMAR GADALE, JM : TH ESE ARE THE APPEALS FILED BY TWO DIFFERENT ASSESSEE AGAINST THE ORDER OF CIT(A), HAZARIBAG, DATED 05.01.2016 & 02.02.2016 , FOR THE ASSESSMENT YEAR 2009 - 2010 . 2. NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN THE MATTER WAS CALLED FOR HEARING, NEITHER ANY ADJOURNMENT APPLICATION HAS BEEN FIELD BY 2 ITA NO. 115&116 /RAN/ 201 6 THE ASSESSEE. THEREFO RE, THE BENCH DECIDED TO DISPOSE OFF THE APPEAL AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD AND THE SUBMISSIONS OF LD. DR. 3 . SINCE BOTH THE APPEALS ARE INTERCONNECTED AND THE SIMILAR ISSUES ARE INVOLVED, THEREFORE, FOR THE SAKE OF CONVENIENCE WE CO NSIDER THE FACTS AND GROUNDS NARRATED IN ITA NO. 115 /RAN/2016, WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : - 1. BECAUSE LEARNED CIT(A) ERRED IN LAW AS WELL AS ON FACTS WHILE CONFIRMING THE PENALTY U/S.271(1)(C). (A) THE TOTAL TAX ARISING BY THE LEARNED LOWER AUTHORITY, HAS BEEN HONESTLY ACCEPTED AND DEPOSITED BY THE ASSESSEE. IN THE CASE OF ACCEPTATION BY THE ASSESSEE THE ABOVE PENALTY SHOULD NOT BE IMPOSED BY THE LEARNED LOWER AUTHORITY AND CONFIRMED BY THE LEARNED CIT(A). SO THE CONFIRMED OF TH E PENALTY U/S.271(1)(C) AMOUNT BE DELETED. 4 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN RETAIL BUSINESS OF GOLD AND SILVER. A SURVEY WAS CONDUCTED U/S.133A ON 16.10.2008 IN THE ASSESSEES PREMISES. THE AO FOUND THAT THE ASSESSEE COULD N OT EXPLAIN THE UNDISCLOSED SOURCE OF INCOME SATISFACTORILY . HENCE, THE AO MADE THE ADDITION AND SUBSEQUENTLY PENALTY PROCEEDING WAS INITIATED LEVYING PENALTY UPON THE ASSESSEE. THE ASSESSEE HAS ACCEPTED THE ADDITION MADE BY THE AO AND PAID THE TAX ACCORDI NGLY. 5 . AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS LD. AR OF THE ASSESSEE ARGUED THE GROUNDS AND MADE SUBMISSIONS. LD. CIT(A) DEALT ON THE ISSUE AFTER CONSIDERING THE SUBMISSIONS OF ASS ESSEE AND FINDINGS OF AO AND DISMISSED THE APPEAL OF THE ASSESSEE. 3 ITA NO. 115&116 /RAN/ 201 6 6. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 7 . NONE FOR THE ASSESSEE, WHEREAS ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LOWER AUTHORIT IES. 8 . WE HAVE HEARD THE SUBMISSIONS OF LD. DR AND PERUSED THE MATERIAL ON RECORD. THE SOLE DISPUTED ISSUE IS WITH RESPECT TO LEVY OF PENALTY. IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE CIT(A) , THE LD. AR SUBMITTED THAT THE ASSESSEE HAS DEPOSITED THE TAX RAISED BY THE AS SESSING OFFICER, THEREFORE, LEVY OF PENALTY CANNOT BE SUSTAINABLE IN THE EYES OF LAW. WE FIND THE ASSESSEE HAS ACCEPTED THE ADDITION MADE BY THE ASSESSING OFFICER AND PAID THE TAX ACCORDINGLY. THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P) LTD., (2010) 322 ITR 158 (SC), HAS OBSERVED THAT I N ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISIONS CANNOT BE INVOKED. WE SUPPORT OUR VIEW WITH THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY, (2013) 359 ITR 565, WHEREIN IT IS HELD AS UNDER : - HELD : PENALTY U/S 271(1)(C) IS A CIVIL LIABILITY. MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS U/S 271. THE EXISTENCE OF SUCH CONDITIONS SH OULD BE DISCERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY. 4 ITA NO. 115&116 /RAN/ 201 6 EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANAT ION 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDI NGS U/S 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND TH E COMMISSIONER. THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORDER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RE SULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE AO IN THE ASSESSMENT ORDER. ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANATION OFFERED IS FOUND TO BE FALSE OR WH EN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAM E AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. IF THE AO HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. NOTICE U /S 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME. SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 A RE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. 5 ITA NO. 115&116 /RAN/ 201 6 THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS IN SO FAR AS CONCEALMENT OF INCOME AND FURNISHING OF INCORRECT PARTICULARS WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCE EDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSME NT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS. (PARA 63) IN THE LIGHT OF WHAT WE HAVE STATED ABOVE, IT IS CLEAR THAT MERELY BECAUSE THE ASSESSEE AGREED FOR ADDITION AND ACCORDINGLY ASSESSMENT ORDER WAS PASSED ON THE BASIS OF THIS ADDITION AND WHEN THE ASSESSEE HAS PAID THE TAX AND THE INTEREST THEREON IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SHOW THE CONCEALMENT OF INCOME, IT CANNOT BE INFERRED THAT THE SAID ADDITION IS ON ACCOUNT OF CONCEALMENT. MOREOVER, THE ASSESSEE HAS OFFERED THE EXPLA NATION. THE SAID EXPLANATION IS NOT FOUND TO BE FALSE. ON THE CONTRARY, IT IS HELD TO BE BONAFIDE. IN FACT IN THE ASSESSMENT PROCEEDINGS THERE IS NO WHISPER ABOUT THESE CONCEALMENT. THE VERY FACT THAT THE ASSESSEE AGREED TO PAY TAX AND DID NOT CHALLENGE TH E ASSESSMENT ORDER, IT IS CLEAR THE CONDUCT OF THE ASSESSEE CANNOT BE CONSTRUED AS MALAFIDE. THEREFORE, THE TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE ORDERS PASSED BY THE APPELLATE AUTHORITY AS WELL AS THE ASSESSING AUTHORITY. IN SO FAR AS THE IMPOSITION OF PENALTY IS CONCERNED, IT IS NOT IN ACCORDANCE WITH LAW. NO FAULT COULD BE FOUND WITH THE TRIBUNAL FOR DELETING THE PENALTY. (PARA 64) CONCLUSION : MERELY BECAUSE THE ASSESSEE AGREED FOR ADDITION AND ACCORDINGLY ASSESSMENT ORDER WAS PASSED ON THE BASIS OF ADDITION AND WHEN THE ASSESSEE HAS PAID THE TAX AND THE INTEREST THEREON IN THE ABSENCE OF 6 ITA NO. 115&116 /RAN/ 201 6 ANY MATERIAL ON RECORD TO SHOW THE CONCEALMENT OF INCOME, IT CANNOT BE INFERRED THAT THE SAID ADDITION IS ON ACCOUNT OF CONCEALMENT SO AS TO LEVY PENALTY U/S 271 (1)(C) . 9 . FURTHER, THE HONBLE SUPREME COURT IN THE CASE OF SIR SHADI LAL SUGAR & GENERAL MILLS LTD. VS. CIT, [1987] 168 ITR 705(SC)/33 TAXMAN 460A(SC) HAS HELD AS UNDER : - WHEN A CONCLUSION HAS BEEN REACHED ON AN APPRECIATION OF A NUMBER OF FACTS ESTAB LISHED BY THE EVIDENCE, WHETHER THAT IS SOUND OR NOT MUST BE DETERMINED, NOT BY CONSIDERING THE WEIGHT TO BE ATTACHED TO EACH SINGLE FACT IN ISOLATION, BUT BY ASSESSING THE CUMULATIVE EFFECT OF ALL THE FACTS IN THEIR SETTING AS A WHOLE. WHERE AN ULTIMATE F INDING ON AN ISSUE IS AN INFERENCE TO BE DRAWN FROM THE FACTS FOUND, ON THE APPLICATION OF ANY PRINCIPLES OF LAW, THERE WILL BE A MIXED QUESTION OF LAW AND FACT, AND THE INFERENCE FROM THE FACTS FOUND IS, IN SUCH A CASE, A QUESTION OF LAW. BUT WHERE THE FI NAL DETERMINATION OF THE ISSUE EQUALLY WITH THE FINDING OR ASCERTAINMENT OF THE BASIC FACTS DOES NOT INVOLVE THE APPLICATION OF ANY PRINCIPLE OF LAW, AN INFERENCE FROM THE FACTS CAN NOT BE REGARDED AS ONE OF LAW. THE PROPOSITION THAT AN INFERENCE FROM FACT S IS ONE OF LAW IS, THEREFORE, CORRECT IN ITS APPLICATION TO MIXED QUESTIONS OF LAW AND FACT, BUT NOT TO PURE QUESTIONS OF FACT. IN THE CASE OF PURE QUESTIONS OF FACT AN INFERENCE FROM THE FACTS IS AS MUCH A QUESTION OF FACT AS THE EVIDENCE OF THE FACTS. I N THE INSTANT CASE, THERE WAS A FINDING OF FACT AND UNLESS IT COULD BE SAID THAT ALL THE RELEVANT FACTS HAD NOT BEEN CONSIDERED IN THE PROPER LIGHT, NO QUESTION OF LAW AROSE. THE TRIBUNAL TOOK INTO ACCOUNT ALL THE RELEVANT FACTS. THE TRIBUNAL HAD BEEN ACC USED BY THE HIGH COURT OF NOT TAKING INTO CONSIDERATION THE FACT THAT THE ASSESSEE HAD ADMITTED THESE AMOUNTS IN THE ASSESSMENT. TO ADMIT THAT THERE HAD BEEN EXCESS CLAIM OR DISALLOWANCE WAS NOT THE SAME THING AS DELIBERATE CONCEALMENT OR FURNISHING INACCU RATE PARTICULARS. AT LEAST IN THE BACKGROUND OF THE LAW AS IT STOOD AT THE RELEVANT TIME THAT WAS THE POSITION. IN THIS CASE, THE TRIBUNAL HAD TAKEN INTO CONSIDERATION THE FACT THAT THE ASSESSEE HAD ADMITTED THE ADDITIONS AS ITS INCOME WHEN FACED WITH NON - DISCLOSURE IN ASSESSMENT PROCEEDINGS. THE HIGH COURT ACCUSED THE TRIBUNAL OF NOT CONSIDERING THE TIME WHEN THE ASSESSEE ADMITTED THE ADDITIONS, THOUGH IT WAS DULY CONSIDERED BY THE TRIBUNAL. FROM AGREEING TO ADDITIONS IT DID NOT FOLLOW THAT THE AMOUNT AGRE ED TO BE ADDED WAS CONCEALED. THERE MAY BE HUNDRED, AND ONE REASONS FAR SUCH ADMISSIONS, I.E., WHEN THE ASSESSEE REALISED THE TRUE POSITION IT DID NOT DISPUTE CERTAIN 7 ITA NO. 115&116 /RAN/ 201 6 DISALLOWANCES BUT THAT DID NOT ABSOLVE THE REVENUE FROM PROVING THE MENS REA OF QUASI - CRI MINAL OFFENCE. THE TRIBUNAL WAS UNDOUBTEDLY COMPETENT TO DISAGREE WITH THE VIEW OF THE AAC BUT IN PROCEEDING TO DO SO, IT HAD TO ACT JUDICIALLY, I.E., TO CONSIDER ALL THE EVIDENCE IN FAVOUR OF AND AGAINST THE ASSESSEE. AN ORDER RECORDED ON A REVIEW OF ONL Y A PART OF THE EVIDENCE AND IGNORING THE REMAINING EVIDENCE CANNOT BE REGARDED AS CONCLUSIVELY DETERMINATIVE OF THE QUESTION OF FACT RAISED BEFORE THE TRIBUNAL. IT IS FOR THE INCOME - TAX AUTHORITY TO PROVE THAT A PARTICULAR RECEIPT IS TAXABLE. IF, HOWEVER, THE RECEIPT IS ACCEPTED AND CERTAIN AMOUNT IS ACCEPTED AS TAXABLE, IT CAN BE ADDED BUT FROM THAT IT DOES NOT FOLLOW THAT IT IS ACCEPTED BY THE ASSESSEE THAT IT HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS OR CONCEALED ANY INCOME. THE TRIBUNAL HAD PRO PERLY CONSIDERED ALL THE EVIDENCES IN THE INSTANT CASE. FURTHER, IN THE INSTANT CASE, IT WAS NOT SAID THAT THE TRIBUNAL HAD ACTED ON MATERIAL WHICH WAS IRRELEVANT TO THE ENQUIRY OR CONSIDERED MATERIAL WHICH WAS PARTLY RELEVANT AND PARTLY IRRELEVANT OR BAS ED ITS DECISION PARTLY ON CONJECTURES, SURMISES AND SUSPICIONS. THE TRIBUNAL HAD MADE ADDITIONS DURING THE ASSESSMENT PROCEEDINGS. 10. WE RESPECTFULLY FOLLOW THE JUDICIAL DECISIONS AND FOUND THAT WHEN THE ASSESSEE HAS ADMITTED THE ADDITIONS AND ACCORDINGL Y ASSESSMENT ORDER WAS PASSED ON THE BASIS OF THIS ADDITION AND WHEN THE ASSESSEE HAS PAID THE TAX AND THE INTEREST THEREON IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SHOW THE CONCEALMENT OF INCOME, IT CANNOT BE INFERRED THAT THE SAID ADDITION IS ON ACCOU NT OF CONCEALMENT. THEREFORE, WE DELETE THE PENALTY LEVIED BY THE LOWER AUTHORITIES OF RS. 1,50,000/ - IN ITA NO.115/RAN/2016 AND RS.2,50,000/ - IN ITA NO.116/RAN/2016 FOR THE ASSESSMENT YEAR 200 9 - 10 AND ALLOW THE GROUND S OF APPEAL OF THE ASSESSEE FOR BOTH TH E YEARS UNDER CONSIDERATION. 8 ITA NO. 115&116 /RAN/ 201 6 11. IN THE RESULT, BOTH APPEALS OF ASSESSEE S ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 / 05 /201 8 SD/ - SD/ - ( N.S.SAINI ) ( PAVAN KUMAR GADALE ) ACCOUNTANT MEMBER JUDICIAL MEMBER RANCHI , DATED 28 / 05 /201 8 PRAKASH KUMAR MISHRA , SR. PS CO PY OF THE ORDER FORWARDED TO : BY ORDER, //TRUE COPY// SR.PS, ITAT, RANCHI 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. CIT , CONCERNED 5. DR, ITAT, RANCHI 6. GUARD FILE.