Kamalkar M. Havel, Kolhapur V. ITO (Central), Kolhapur

ITA 1170/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56634 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 30-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Search and seizure
• Section: 143(3); 153A

Judgement Text

1 ITA NOS. 1170 TO 1173/PN/20 10 KAMALAKAR MANOH AR HAVAL A.YS. 2001-02 TO 2004-05 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NOS. 1170 TO 1173/PN/2010 (ASSTT. YEARS: 2000-01 TO 2004-05) KAMALAKAR MANOHAR HAVAL APPELLANT 249, E WARD, NAGALA PARK KOLHAPUR 416003 PAN :AAEPH4480K V. I.T.O, CENTRAL RESPONDENT KOLHAPUR APPELLANT BY : SHRI C.H. NANIWADEKAR RESPONDENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 09/12/11 DATE OF PRONOUNCEMENT:30/12/11 ORDER PER I.C. SUDHIR, JM IN ALL THESE APPEALS, THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER WHEREBY THE LD CIT(A) HAS LEVIED PENALTY U/S. 271(1)(C) WIT H THIS CONTENTION THAT IT HAS BEEN LEVIED ON NOTIONAL ADDITION. 2. THE RELEVANT FACTS ARE THAT ASSESSEE IS A WORKIN G PARTNER IN M/S.KAMALAKAR MANOHAR HAVEL AND BROTHERS CARRYING ON THE BUSINESS OF TRADING IN GOLD AND SILVER JEWELLERY IN KOLHAPUR. THE FIRM WAS SUBJECTED TO S EARCH ACTION U/S. 132 OF THE ACT. RETURN WAS FILED BY ASSESSEE U/S. 153A AND THE A.O HAS FRAMED THE ASSESSMENT ON THE BASIS OF INCOME/INVESTMENT OFFERED BY ASSESSEE IN RESPECT OF A.Y. THE A.O. HAS LEVIED PENALTY U/S. 271(1)(C ) ON THE ADDITION MADE ON INC OME OF HOUSE PROPERTY WHICH WAS NOT OFFERED IN ORIGINAL RETURN. 2 ITA NOS. 1170 TO 1173/PN/20 10 KAMALAKAR MANOH AR HAVAL A.YS. 2001-02 TO 2004-05 3. THE CONTENTION OF THE LD. A.R. REMAINED THAT THE ADDITION WAS MADE ON NOTIONAL INCOME OF THE HOUSE PROPERTY ON ESTIMATE BASIS, HEN CE THERE WAS NO JUSTIFICATION TO LEVY PENALTY U/S. 271(1)(C ) ON SUCH NOTIONAL ADDITION M ADE ON ESTIMATE BASIS. THE LD. A.R. SUBMITTED THAT THE HOUSE PROPERTIES WERE DISCLOSED BY THE ASSESSEE IN THE BALANCE SHEET AND INCOME FROM THE SAID PROPERTY WAS NOT SHO WN AS NO ACTUAL RENT WAS RECEIVED FROM THESE HOUSE PROPERTIES. HE SUBMITTED THAT THE RE WAS NO INTENTION TO CONCEAL THE NOTIONAL FAIR RENTAL VALUE FROM THESE PROPERTIES. HE CONTENDED THAT THE PENAL PROVISION OF SECTION 271(1)(C ) CANNOT BE INVOKED FOR ADDITIO N ON ACCOUNT OF NOTIONAL INCOME AS THERE WAS NO DELIBERATE ATTEMPT BY THE ASSESSEE. T HE LD. A.R. REFERRED THE CONTENTS OF EXPLANATION-1 TO SECTION 271(1)(C ) OF THE ACT WITH THIS SUBMISSION THAT IN CASE OF BONAFIDE EXPLANATION, PENALTY U/S. 271(1)(C ) IS NO T LEVIABLE ON SUCH INCOME REMAINED TO BE DECLARED DUE TO SOME BONAFIDE REASON. 4. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTIF Y THE ACTIONS OF THE AUTHORITIES BELOW. HE ALSO REFERRED CONTENTS OF PARA NO. 11 OF THE FIRST APPELLATE ORDER WITH THIS SUBMISSION THAT THE APPELLANT GOT SEVERAL OPPORTU NITIES TO INCLUDE THE INCOME IN QUESTION AND OFFER THE SAME FOR TAXATION, BUT HE DI D NOT AVAIL THE OPPORTUNITIES FOR THE REASONS BEST KNOWN TO HIM. THE ASSESSEE DID NOT C ONTEST ADDITIONS MADE. HE SUBMITTED THAT MERE SHOWING THE ASSETS IN THE BALAN CE SHEET DID NOT AMOUNT TO DISCLOSURE OF FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME. SHE SUBMITTED FURTHER THAT EVEN AFTER SEARCH AND SEIZURE ACTION, THE ASSE SSEE DID NOT DISCLOSE THE NOTIONAL INCOME FROM THE ABOVE PROPERTIES IN TERMS OF PROVIS ION OF SECTION 23(4) OF THE INCOME TAX ACT. 5. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW, WE FIND THAT THE ASSESSEE WAS SUBJECTED TO SEARCH U/S. 132 OF THE A CT. IN RESPONSE TO NOTICE U/S. 153A(A), THE ASSESSEE SUBMITTED THAT THE ORIGINAL R ETURNS FOR THE A.YS. UNDER CONSIDERATION FILED U/S. 139 MAY BE TREATED AS FIL ED IN RESPONSE TO THE NOTICES U/S. 3 ITA NOS. 1170 TO 1173/PN/20 10 KAMALAKAR MANOH AR HAVAL A.YS. 2001-02 TO 2004-05 153A(A). THE ASSESSMENTS U/S. 153A READ WITH SECTI ON 143(3) WERE COMPLETED DETERMINING THE FOLLOWING INCOME : ASST. YEAR ASSESSED INCOME 2001 - 02 RS.1,34,258/ - 2002 - 03 RS.1,36,192/ - 2003 - 04 RS.1,56,586/ - 2004 - 05 RS.1,85,240/ - 6. DURING THE COURSE OF ASSESSMENT, ADDITIONS WERE MADE ON ACCOUNT OF INCOME FROM HOUSE PROPERTY IN RESPECT OF FOLLOWING PROPERT IES FOR THE A.YS UNDER CONSIDERATION : SR.NO. PROPERTIES ADDITION MADE FOR AYS 2001-02 2002-03 2003-04 2004-05 1. BUILDING AT 1768, A WARD,SAKOLI CORNER, KOLHAPUR 22500 22500 2250 0 22500 2. FARM HOUSE AT KANERIWADI 15000 15000 15000 15000 3. HOUSE PROPERTY AT SURVENAGAR, KOLHAPUR 11250 -- -- -- TOTAL 48750 37500 37500 37500 SHOW CAUSE NOTICES WERE ISSUED FOR THE PROPOSED LE VY OF PENALTY U/S. 271(1)(C ) ON THE ABOVE ADDITION. THE ASSESSEE EXPLAINED THAT THE A BOVE HOUSE PROPERTIES WERE DISCLOSED BY HIM IN THE BALANCE SHEET; NO ACTUAL RE NT WAS RECEIVED FROM THESE PROPERTIES AND THERE WAS NO INTENTION TO CONCEAL TH E NOTIONAL FAIR RENTAL VALUE FROM THE ABOVE PROPERTIES. THE A.O DID NOT AGREE WITH THE E XPLANATION AND LEVIED PENALTY U/S. 4 ITA NOS. 1170 TO 1173/PN/20 10 KAMALAKAR MANOH AR HAVAL A.YS. 2001-02 TO 2004-05 271(1)(C ) ON THE BASIS THAT THE ASSESSEE HAD CONCE ALED THE PARTICULARS OF INCOME. THE SAME HAS BEEN UPHELD BY THE LD CIT(A). NOW THE ISS UE BEFORE US IS AS TO WHETHER REFLECTION OF THE HOUSE PROPERTIES IN THE NAME OF T HE ASSESSEE IN ITS BALANCE SHEET WOULD BE AMOUNTING TO FURNISHING OF PARTICULARS OF INCOME ESPECIALLY WHEN ASSESSEE HAD NOT RECEIVED ACTUAL RENTAL INCOME FROM THOSE HO USE PROPERTIES TO ATTRACT THE PENAL PROVISION U/S. 271(1)(C ) OF THE ACT. IT IS AN EST ABLISHED PROPOSITION OF LAW THAT PENAL ACTION IS ALWAYS INVOKED WITH ABUNDANT PRECAUTION. IN OTHER WORDS, FOR INVOKING THE PENAL PROVISION, THERE MUST BE CLEAR COMPLIANCE OF THE REQUIREMENT OF THE PROVISIONS BEYOND DOUBT. THUS, UNLESS AN ADDITION OF INCOME B Y THE A.O IS DUE TO CONCEALMENT OF PARTICULARS OF THAT INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF ON THE PART OF THE ASSESSEE, PENALTY U/S. 271(1)(C ) IS NOT LEVIED. I T IS THE REASON BEHIND THAT THE LEGISLATURE HAS EXEMPTED THOSE ADDITIONS FROM THE L EVY OF PENALTY WHERE SUCH PERSON IS ABLE TO OFFER A BONAFIDE EXPLANATION THAT ALL THE F ACTS RELATING TO THE INCOME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HA VE BEEN DISCLOSED BY HIM . EXPLANATION 1 TO SECTION 271(1)(C ) OF THE ACT DEAL S WITH SUCH SITUATION. FOR A READY REFERENCE, THE SAME IS REPRODUCED HEREUNDER : EXPLANATION 1.- WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMP UTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE [ASSESSING] OFFICER OR THE [COMMISS IONER (APPEALS)] [OR THE COMMISSIONER] TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT A BLE TO SUBSTANTIATE [AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM]. THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C ) OF THIS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 5 ITA NOS. 1170 TO 1173/PN/20 10 KAMALAKAR MANOH AR HAVAL A.YS. 2001-02 TO 2004-05 IN THE PRESENT CASE BEFORE US, THE EXPLANATION SUB MITTED BY THE ASSESSEE THAT THE ASSESSEE HAD REFLECTED ALL HIS 4 DIFFERENT HOUSE P ROPERTIES IN THE BALANCE SHEET AND NO ACTUAL RENT WAS RECEIVED FROM THESE PROPERTIES HAS NOT BEEN FOUND BY THE A.O TO BE FALSE. ADMITTEDLY, THE ADDITION ON ACCOUNT OF RENT AL INCOME FROM THOSE HOUSE PROPERTIES HAS BEEN MADE ON NOTIONAL AND ESTIMATE BASIS. THUS , IT CANNOT BE SAID BEYOND DOUBT THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF ON THE PART OF ASSESSEE TOWARDS THE INCOME FROM THOSE HOUSE PROPERTY TO ATTRACT THE PENAL PROVISION U/S. 271(1)(C ) OF THE ACT. ON HAVING GONE THROUGH THE PROVISIONS OF EXPLANATION 1 REPRODUCED HEREINABOVE, WE ALSO NOTE THAT THERE IS WORD OR BETWEEN THE CLAUSES (A) AND (B) TO THE EXPLANATION 1 OF THE SEC TION 271(1)(C ) OF THE ACT. WE ARE THUS OF THE VIEW THAT THERE WAS NO JUSTIFICATION FO R THE A.O TO LEVY PENALTY IN QUESTION, UPHELD BY THE LD CIT(A). WE THUS WHILE SETTING ASI DE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD DIRECT THE A.O TO DELETE THE PENALTY IN QUESTION LEVIED DURING THE A.YS. UNDER CONSIDERATION. THE GROUND IS ACCORDINGLY ALLOWED I N FAVOUR OF THE ASSESSEE. 7. IN RESULT, APPEALS ARE ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30TH D ECEMBER, 2011. SD/- SD/- ( D. KARUNAKARA RAO ) ACCOUNTANT MEMBER (I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 30TH DECEMBER, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT I/II, KOLHAPUR/ CIT (CENTRAL), PUNE 4. THE CIT(A)- KOLHAPUR 6 ITA NOS. 1170 TO 1173/PN/20 10 KAMALAKAR MANOH AR HAVAL A.YS. 2001-02 TO 2004-05 5. THE D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE