ITO, Central-2, Nashik V. Shri Sanjay N. Vyas., Jalgaon

ITA 1188/PUN/2011

• Counselvise Citation: 118824514 RSA 2011
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 22-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH VERMA; P L PATHADE
• Keywords: Search and seizure; Bonafide belief; Reasonable cause
• Section: 273B; 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1188/PN/2011 A.Y. 2006-07 ITO, CENTRAL-2, NASHIK APPLICANT VS. SHRI SANJAY N. VYAS, J-98-99, MIDC, AJANTA ROAD, JALGAON PAN: AAIPV7998J RESPONDENT APPELLANT BY : SHRI MUKESH VERMA, CIT & SHRI P.L. PATHADE RESPONDENT BY : SHRI NIK HIL PATHAK DATE OF HEARING: 20.02.2014 DATE OF ORDER : 26.02.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-I, [SHORT CI T(A)-I] NASHIK, DATED 04.07.2011 FOR A.Y. 2006-07 ON THE FO LLOWING GROUNDS. 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN CANCELING THE PENALTY LEVIE D AT RS.6,85,703/- U/S. 271(1) (C) OF THE ACT. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN CONSIDERING EARLIER YEAR'S LOSSES AS AVAILABLE TO BE SET-OFF AGAINST ASSESSEE'S UNDISCLO SED INCOME THIS YEAR, WHICH IS CONTRADICTORY TO HIS OWN DECISION DENYING THE BENEFIT OF CARRY FORWARD OF LO SSES TO THE ASSESSEE FOR EARLIER A.YRS. 1999-2000 TO 2005-0 6. 2 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE UNDISCLOSED INCOME OF RS.20.00 LAKHS WAS SHOWN IN T HE RETURN FILED U/S. 153A I.E. ONLY AFTER THE ACTION U /S. 132 OF THE ACT BY THE DEPARTMENT AND HENCE THE DISCLOSU RE IS NOT VOLUNTARY. 4. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE H AD A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE ACT EVEN THOUGH THE ASSESSEE PREPARED FINAL ACC OUNTS ONLY WITH THE INTENTION OF DEFRAUDING THE STATE BAN K OF INDIA AND THE INCOME TAX DEPARTMENT. 5. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE UNDISCLOSED MINOR'S INCOME OF RS.37,146/- WAS SHOWN IN THE RETURN U/S.153A ONLY AFTER DETECTION BY THE DEPARTMENT AND THIS FACT OF THE ASSESSEE TO DEFRAUD REVENUE DOES NOT CONSTITUTE REASONABLE CAUSE WITHIN THE MEANING OF PROVISION OF SECTION 273B OF THE ACT. 6. APPELLANT CRAVES, LEAVES OF THE HONBLE TRIBUNAL TO ADD, AMEND / AFTER OR DELETE ANY OF THE AFORESAID GROUND HEREIN IF DIRECTED SO. 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS ACTIVITY. A SEARCH AND SEIZURE ACTION HAS BEEN CO NDUCTED IN THE CASE OF ASSESSEE ON 22.11.2007. THE ASSESSEE HAS F ILED ORIGINAL RETURN OF INCOME U/S.139(1) OF THE ACT DECLARING IN COME OF 11,55,330/- ON 30.10.2006. THE ASSESSEE HAS FILED R ETURN OF INCOME IN RESPONSE TO NOTICE U/S.153A ON 30.03.2009 DECLARING INCOME OF 38,060/- AND HAS CARRIED FORWARD LOSS TO THE EXTEN T OF 4,50,253. THE ASSESSING OFFICER HAS ASSESSED THE I NCOME OF THE ASSESSEE AT 26,36,910/-. THE ASSESSING OFFICER HAS DISALLOWED THE LOSSES CARRIED FORWARD BY THE ASSESS EE IN RESPECT OF A.YS. 1999-2000 TO 2005-06 TO THE EXTENT INCREAS ED BY THE ASSESSEE COMPARED TO THE ORIGINAL RETURN ON ACCOUNT OF CLAIM OF INTEREST ON LOAN NOT CLAIMED IN ORIGINAL RETURN FIL ED. THE 3 ASSESSING OFFICER HAS LEVIED THE PENALTY ON AMOUNT DEPOSITED IN BANK LOAN AMOUNTING TO 20 LAKHS OUT OF SPECULATION PROFIT AND ALSO ON INTEREST ON JKRD FIXED DEPOSIT OF 37,146. 2.1 THE MATTER HAS BEEN CARRIED BEFORE THE FIRST AP PELLATE AUTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAI SED AND CIT(A) HAVING GONE THROUGH THE CONTENTIONS OF ASSES SEE, HAS DELETED THE PENALTY LEVIED ON ALL ACCOUNTS. THE SA ME HAS BEEN OPPOSED BEFORE US BY REVENUE, INTER ALIA STATED THA T THE CIT(A) ERRED IN CONSIDERING EARLIER YEAR'S LOSSES AS AVAIL ABLE TO BE SET-OFF AGAINST ASSESSEE'S UNDISCLOSED INCOME THIS YEAR, WH ICH IS CONTRADICTORY TO HIS OWN DECISION DENYING THE BENEF IT OF CARRY FORWARD OF LOSSES TO THE ASSESSEE FOR EARLIER A.YRS . 1999-2000 TO 2005-06. THE CIT(A) ERRED IN NOT APPRECIATING THAT THE UNDISCLOSED INCOME OF 20.00 LAKHS WAS SHOWN IN THE RETURN FILED U/S. 153A I.E. ONLY AFTER THE ACTION U/S. 132 OF THE ACT BY THE DEPARTMENT AND HENCE THE DISCLOSURE IS NOT VOLU NTARY. THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAD A REA SONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE ACT EVEN THOUGH THE ASSESSEE PREPARED FINAL ACCOUNTS ONLY WITH THE INTE NTION OF DEFRAUDING THE STATE BANK OF INDIA AND THE INCOME T AX DEPARTMENT. THE CIT(A) ERRED IN NOT APPRECIATING T HAT THE UNDISCLOSED MINOR'S INCOME OF 37,146/- WAS SHOWN IN THE RETURN U/S.153A ONLY AFTER DETECTION BY THE DEPARTM ENT AND THIS FACT OF THE ASSESSEE TO DEFRAUD REVENUE DOES NOT CO NSTITUTE REASONABLE CAUSE WITHIN THE MEANING OF PROVISION OF SECTION 273B OF THE ACT. ACCORDINGLY, THE ORDER OF CIT(A) BE SE T ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAN D, THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER O F CIT(A) ON THE ISSUE. 2.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS INCURRED SUBS TANTIAL LOSSES IN A.YS. 1999-2000 TO 2005-06 AND FINANCIAL CONDITI ON OF 4 ASSESSEE WAS NOT GOOD. THE ASSESSEE HAS RAISED LOA NS OF MORE THAN OF 1 CRORE FROM STATE BANK OF INDIA. THE ASSESSEE HA S ALSO RAISED LOAN FROM JALGAON RETAIL KIRANA DEALERS URBA N CO-OP. CREDIT SOCIETY. THESE LOANS HAVE BEEN UTILIZED BY T HE ASSESSEE FOR THE PURPOSE OF HIS BUSINESS. NORMALLY, THE BANKS D O NOT SANCTION LOAN IN CASE THE ASSESSEE HAS ALREADY AVAI LED LOAN FROM OTHER INSTITUTIONS. THE ASSESSEE HAS, THEREFORE, R OUTED THE TRANSACTIONS IN LOAN ACCOUNT WITH JKRD CREDIT SOCIE TY THROUGH CAPITAL ACCOUNT AND HAS NOT SHOWN THE SAID LOAN IN THE BALANCE SHEET AND INTEREST ON THE SAID LOAN IN THE PROFIT A ND LOSS ACCOUNT AND FILED THE SAID PROFIT AND LOSS ACCOUNT AND BALA NCE SHEET WITH THE STATE BANK OF INDIA FOR LOAN PURPOSES. THE ASS ESSEE HAS CLAIMED THE SAID INTEREST EXPENDITURE IN THE RETURN S FILED IN RESPONSE TO NOTICES U/S. 153A. THE ASSESSING OFFIC ER HAS ACCEPTED THE LOSSES ON ACCOUNT OF THE SAID INTEREST , WHILE ASSESSING INCOME U/S.153A R.W.S. 143(3) OF EARLIER YEARS AND THE YEAR UNDER APPEAL. FURTHER, THE ASSESSING OFFI CER HAS NOT ALLOWED CARRY FORWARD OF THE LOSSES FOR EARLIER YEA RS TO THE EXTENT OF 30,87,936/-. THIS HAS MAINLY RESULTED INTO ASSESSE D INCOME OF A.Y. 2006-07 AT 26,36,910/- AS AGAINST LOSS RETURNED BY THE ASSESSEE OF 4,50,253/-. 2.3 THE ASSESSING OFFICER HAS NOT ALLOWED THE CARRY FORWARD OF INCREASED LOSS ASSESSED BY HIM U/S. 153A R.W.S.143( 3) FOR EARLIER YEARS ONLY FOR THE REASON THAT THE SAID LOSSES HAVE NOT BEEN DETERMINED AS PER PROVISIONS OF SECTION 80 R.W.S. 1 39(3) OF THE ACT. IN THIS REGARD THE ASSESSEE HAS POINTED OUT T HAT SECTION 139(3) REQUIRES THAT THE ORIGINAL RETURN HAS TO BE FILED WITHIN TIME ALLOWED U/S.139(1) AND THE ASSESSEE HAS FILED RETUR NS FOR EARLIER YEARS IN TIME U/S. 139(1) AND HENCE THE INCREASED L OSSES AS PER RETURNS FILED IN RESPONSE TO NOTICES U/S. 153A ACCE PTED AND ASSESSED BY THE ASSESSING OFFICER U/S. 153A R.W.S. 143(3) SHOULD HAVE BEEN ALLOWED TO BE CARRIED FORWARD. THE CIT(A ) HAS ALSO NOT ALLOWED THE CARRY FORWARD OF THE SAID LOSSES STATIN G THAT THE 5 RETURNS FILED IN RESPONSE TO NOTICES U/S. 153A COUL D NOT BE REGARDED AS THE RETURNS FILED U/S.139(5). IN THE CASE OF NICHOLAS APPLEGATE SOUTH EAST ASIA FUND LTD. VS. ADIT (INTER NATIONAL TAXATION) 20 DTR 1 (MUM)(TM), WHEREIN, THE ASSESSIN G OFFICER AND THE CIT(A) HAVE NOT ALLOWED THE CARRY FORWARD O F THE LOSSES IN VIEW OF PROVISIONS OF SECTION 80 R.W.S. 139(3) OF T HE ACT STATING THE TECHNICAL REASON THAT THE ASSESSEE HAS NOT FILED OR IGINAL RETURN IN TIME AND THE RETURNS FILED WITHIN TIME ALLOWED U/S. 139(1) WERE INVALID RETURNS. IN APPEAL, THE TRIBUNAL HAS DECID ED THE ASSESSEE'S APPEAL IN ITS FAVOUR STATING THAT THE TE CHNICAL REASON STATED BY THE ASSESSING OFFICER AND THE CIT(A) COUL D NOT BE UPHELD IN VIEW OF PROVISIONS OF SECTION 292B. IN VI EW OF THE ABOVE DISCUSSION AND THE FACTS OF THE CASE, THE CIT(A) HA S OBSERVED THAT THE DISALLOWANCE OF CARRY FORWARD OF LOSSES IS DEBA TABLE ISSUE IN RESPECT OF WHICH TWO VIEWS ARE POSSIBLE AT THE RELE VANT POINT OF TIME. IN SUCH A SITUATION, PENALTY U/S.271(L)(C) S HOULD NOT BE LEVIED. 2.4 IF THE CARRIED FORWARD LOSSES OF THE EARLIER YE ARS AS ASSESSED BY THE ASSESSING OFFICER U/S.L53A R.W.S.143(3) WERE CONSIDERED AS CARRIED FORWARD LOSSES IN A.Y. 2006-07 I.E. YEAR UN DER APPEAL THEN THE INCOME OF THE ASSESSEE RESULT INTO LOSS OF 4,50,253/- AS AGAINST INCOME ORIGINALLY RETURNED BY THE ASSESS EE U/S.139(1) AT 11,55,330/-. IN CASE INCOME AS WELL AS EXPENDITURE IS SUPPRESSED THE NET ADDITION ON ACCOUNT OF EXCESS OF INCOME SUPPRESSED OVER EXPENDITURE IS TO BE MADE AND PENAL TY IS LEVIABLE ON THE SAID NET DIFFERENCE. IN THE CASE BEFORE US, THE EXPENDITURE SUPPRESSED IS MORE THAN THE INCOME SUPPRESSED OF 20 LACS. THE LOSS CARRIED FORWARD IN THE YEAR UNDER APPEAL AMOUN TING TO 30.87 LACS IS DISALLOWED BY THE ASSESSING OFFICER F OR THE TECHNICAL REASON WHICH IS MUCH MORE THAN 20 LACS. IT WAS ALSO OBSERVED THAT THE ASSESSEE HAS NOT DISCLOSED THE LOAN ACCOUN T WITH JKRD CREDIT CO-OP. SOCIETY AND DEPOSIT THEREIN AMOUNTING TO 20 LACS OUT OF SPECULATION INCOME AND INTEREST ON THE SAID LOAN ACCOUNT 6 AMOUNTING TO 30.87 LACS IN EARLIER YEAR AND 5.54 LACS IN CURRENT YEAR AS THE ASSESSEE WANTED TO AVAIL LOAN O F ABOUT 1 CRORE FROM STATE BANK OF INDIA AND HENCE HE ROUTED THE TRANSACTIONS IN THE JKRD CREDIT SOCIETY LOAN ACCOUN T THROUGH CAPITAL ACCOUNT AND NOT REFLECTED THE SAME IN THE B ALANCE SHEET AND PROFIT AND LOSS ACCOUNT. IN VIEW OF THE ABOVE, THE CIT(A) WAS OF THE VIEW THAT FOR THE REASONS DISCUSSED ABOVE AN D IN EARLIER PARAGRAPHS, THE ASSESSEE HAS SUPPRESSED EXPENDITURE AND CARRIED FORWARD OF LOSS FOR THE SAME IN THE CURRENT YEAR WHICH IS MORE THAN THE SUPPRESSED INCOME AND HENCE PROVISION S OF SECTION 271(L)(C) ARE NOT APPLICABLE TO THE FACTS O F THE ASSESSEES CASE. THIS REASONED FINDING OF CIT(A) VIS-A-VIS DE LETING OF PENALTY OF 20 LACS U/S.271(1)(C) NEEDS NO INTERFERENCE FROM O UR SIDE. WE UPHOLD THE SAME. 3. THE ASSESSING OFFICER HAS ALSO LEVIED PENALTY U/ S. 271(L)(C) ON THE INTEREST INCOME ON JKRD CREDIT SOCIETY FIXED DEPOSITS OF MINOR CHILDREN. IN THIS REGARD, THE ASSESSING OFFIC ER HAS STATED THAT THE ASSESSEE HAS NOT OFFERED TO TAX THE SAID I NCOME IN THE ORIGINAL RETURN OF INCOME FILED U/S.139(L) OF THE A CT BUT HAS OFFERED THE SAME IN THE RETURN FILED U/S.153A AND H ENCE HE HAS TREATED THE SAID INCOME AS CONCEALED INCOME AND HAS LEVIED PENALTY U/S.271(L)(C) OF THE ACT. IN APPEAL, THE A SSESSEE HAS RAISED VARIOUS CONTENTIONS AND AFTER HAVING CONSIDE RED THE SAME, THE CIT(A) HAS DELETED THE SAME. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE. ON THE OTHER HAND, THE AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER O F CIT(A). AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT THE ASSESSEE HAS NOT DECLARED INTEREST INCOME OF 37,146/- FROM JKRD SOCIETY ON FIXED DEPOSIT OF MINO R CHILDREN AND HAS ALSO NOT CLAIMED INTEREST EXPENDITURE OF 5,54,793/- ON LOAN FROM JKRD SOCIETY IN ORIGINAL RETURN FILED. I N VIEW OF ABOVE, THE STAND OF THE ASSESSEE HAS BEEN THAT HE HAS NOT CONCEALED ANY INCOME WHICH WAS FOUND REASONABLE AND ACCEPTED. 7 4. IN VIEW OF THIS, THE ASSESSEE WAS UNDER THE BONA FIDE BELIEF THAT THE PARTICULAR ITEM OF INCOME IS NOT LIABLE TO TAX IN HIS HANDS, SO PENALTY IS ALSO NOT LEVIABLE IN VIEW OF T HE PROVISIONS OF SECTION 273B OF THE ACT. AS SUCH, BONAFIDE BELIEF COULD BE REGARDED AS REASONABLE CAUSE FOR FAILURE ON THE PAR T OF ASSESSEE TO DECLARE THE SAID INCOME IN THE RETURN OF INCOME. IN VIEW OF ABOVE, THE CIT(A) HAS RIGHTLY DELETED THE PENALTY O F 37,146/- LEVIED BY THE ASSESSING OFFICER UNDER THE PROVISION S OF SECTION 271(1)(C). THIS REASONED FINDING OF CIT(A) NEEDS N O INTERFERENCE FROM OUR SIDE, WHO HAS DELETED THE SAME ON ACCOUNT OF REASONABLE CAUSE AS ENVISAGED U/S.273B OF ACT. WE UPHOLD THE SAME. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 26 TH OF FEBRUARY, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 26 TH FEBRUARY, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I, NASHIK 4) THE CIT-I, NASHIK 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE