M/s. Mittal Enterprises, Pune V. Deputy Commissioner of Income-tax,

ITA 1228/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5160 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-10-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 07-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SURESH KHANDELWAL
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E . , , , ! BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 1228/PUN/2016 # # / ASSESSMENT YEAR : 2007-08 M/S. MITTAL ENTERPRISES, C/O. KHANDELWAL JAIN & ASSOCIATES, IST FLOOR, ALANKAR CINEMA BUILDING, NEAR RAILWAY STATION, PUNE 411 001 PAN : AAHFM8820F ....... / APPELLANT / V/S. DCIT, CIRCLE-8, PUNE / RESPONDENT ASSESSEE BY : SHRI SURESH KHANDELWAL REVENUE BY : SHRI SUDHENDU DAS / DATE OF HEARING : 08.10.2018 / DATE OF PRONOUNCEMENT : 08.10.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-9, PUNE, DATED 07-04-2016 FOR THE A.Y. 2007-08. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE INCLUDE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING OF CONSTRUC TION MATERIAL. ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.20,12,620/-. THERE WAS SURVEY ACTION U/S.133A OF THE A CT ON THE ASSESSEE ON 13-03-2007. AO NOTICED CERTAIN DISCREPANCIE S IN THE 2 ITA NO.1228/PUN/2016 M/S. MITTAL ENTERPRISES PHYSICAL STOCK FOUND AT THE BUSINESS PREMISES OF THE ASSE SSEE. ON THIS ACCOUNT, ASSESSEE OFFERED ADDITIONAL INCOME OF RS.20 LAKHS S TATEMENT OF MR. CHANDRAKANT SUVALAL AGARWAL WAS RECORDED. THE SAID A DDITIONAL INCOME WAS CONSIDERED IN THE BOOKS OF ACCOUNTS AS ADDIT IONAL INCOME AND PAID THE REQUISITE TAXES. THE INCOME RETURNED BY T HE ASSESSEE WAS ACCEPTED BY THE AO. PENALTY PROCEEDINGS U/S.274 R.W.S. 271(1)(C) OF THE ACT ARE INITIATED FOR CONCEALMENT OF INCOME AND EVENTUALLY LEVIED PENALTY OF RS.6,77,448/-. 3. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO. AGGRIEVED WITH THE ORDER OF CI T(A), THE ASSESSEE FILED THE PRESENT APPEAL WITH THE FOLLOWING GROUNDS : 1. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE C ASE AND AS PER PROVISIONS OF LAW IT BE HELD THAT PENALTY U/S.271(1 )(C) LEVIED BY THE AO & CONFIRMED BY THE IST APPELLATE AUTHORITY IS CONTRAR Y TO THE PROVISIONS OF LAW, UNJUSTIFIED & UNWARRANTED. IT FURTHER BE HELD THAT THE CASE OF THE APPELLANT IS NOT COVERED BY THE MISCHIEF OF PROVISI ONS OF SEC.271(1)(C) OF THE ACT WARRANTING, JUSTIFYING LEVY OF ANY PENALTY IN T ERMS OF THE SAID SECTION & THERE IS NO SCOPE FOR LEVY OF PENALTY U/S.271(1)( C) OF THE ACT. THE PENALTY LEVIED BY THE AO BE DELETED. 2. THE APPELLANT PRAYS TO BE ALLOWED TO ADD, AMEND, MODIFY, RECTIFY, DELETE, RAISE ANY GROUNDS OF APPEAL AT THE TIME OF H EARING. 4. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE RAISED IN THE APPEAL RELATES TO LEVY OF PENALTY U/S.271(1)(C) O F THE ACT IN RESPECT OF SAID ADDITIONAL INCOME OF RS.20 LAKHS DISCLOSED DU RING THE COURSE OF SURVEY ACTION HELD IN THE MONTH OF MARCH, 2007. THE SAID ADDITION IS RELATABLE TO THE EXCESS STOCK CRYSTALLIZED DURIN G THE SURVEY ACTION. THE ADDITIONAL INCOME SO OFFERED BY THE ASSESSEE WA S INCLUDED IN THE RETURN OF INCOME FILED BY THE ASSESSEE AND PAID THE T AXES. HOWEVER, ON COMPLETION OF THE ASSESSMENT, THE AO VIDE HIS ORDER DA TED 30-06- 2010 LEVIED THE PENALTY OF RS.6,77,448/-. 3 ITA NO.1228/PUN/2016 M/S. MITTAL ENTERPRISES 4.1 ON THIS ISSUE, THE CASE OF THE ASSESSEE IS THAT THE P ENALTY IS NOT LEVIABLE AS CONCEALMENT OF INCOME WHEN THE ADDITIONAL INCOME SO DISCLOSED IS RELATABLE TO THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR WHICH HAS NOT BEEN ENDED AND THE RETURN OF INCOME WAS DULY FURNISHED AFTER INCORPORATING THE INACCURACIES AND THE ADD ITIONAL INCOME. FOR THIS PROPOSITION, LD. COUNSEL RELIED ON THE JUDG MENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAS PHARMA CEUTICALS REPORTED IN 11 TAXMANN.COM 207 (DELHI) ON ONE SIDE AND TH E DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF CHANDRAKANT S. AGARWAL (HUF) (PARTNER OF THE FIRM) VS. DCIT IN ITANO.1103/PUN/2016, DATED 20-06- 2018 AND ANOTHER RELATED CASE IN THE CASE OF ASHOK S. AGARWAL VS. DCIT IN ITA NO.1227/PUN/2018, DATED 05-06-2018. 5. LD. DR FOR THE REVENUE RELIED HEAVILY ON THE ORDERS O F THE AO AND THE CIT(A). 6. WE HEARD BOTH THE SIDES AND PERUSED THE ORDERS OF THE REVENUE AND THE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASS ESSEE. WE PERUSED THE ORDER OF TRIBUNAL IN THE CASE OF CHANDRAKANT S. AGARWAL (HUF) WHERE AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. WE THEREFORE PROCEED TO EXTRACT THE FINDING G IVEN BY THE TRIBUNAL HEREIN BELOW FOR THE SAKE OF COMPLETENESS : 6. WE HEARD BOTH THE SIDES, PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE PAPER BOOK FILED BEFORE US. WE HAVE ALSO PERUSED THE DECISIONS RELIED ON BY THE ASSESSEE. ON GOING THROU GH THE FACTS OF THE CASE, WE FIND THIS IS A CASE WHERE ASSESSEE FILED T HE RETURN OF INCOME INCORPORATING THE ADDITIONAL INCOME SUBSEQUENT TO T HE SURVEY ACTION AND THE SAID RETURN HAS BEEN ACCEPTED WITHOUT MAKING AN Y ADDITION. ASSESSEE OFFERED THE ADDITIONAL INCOME AND SUBJECTE D THE SAME TO TAX. SURVEY ACTION TOOK PLACE BEFORE END OF THE FINANCIA L YEAR. IN THE ABOVE BACKGROUND OF THE FACTS, WE FIND THIS ISSUE IS SQUA RELY COVERED BY THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAS PHARMACEUTICALS (SUPRA). FOR THE SAKE OF COMPLETENESS, WE PROCEED TO EXTRACT THE CONCLUSION GIVEN BY THE HIGH COURT AND THE SAME READS AS UNDER : 4 ITA NO.1228/PUN/2016 M/S. MITTAL ENTERPRISES 12. AFTER CONSIDERING THE RESPECTIVE SUBMISSIONS O F THE LEARNED COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT TH E ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE HAS TO PREVAIL AS IT CARRIED SUBSTANTIAL WEIGHT. IT IS TO BE KEPT IN MIND THAT S ECTION 271(1)(C) OF THE ACT IS A PENAL PROVISION AND SUCH A PROVISION H AS TO BE STRICTLY CONSTRUED. UNLESS THE CASE FALLS WITHIN THE FOUR-CO RNERS OF THE SAID PROVISION, PENALTY CANNOT BE IMPOSED. SUB-SECTION ( 1) OF SECTION 271 STIPULATES CERTAIN CONTINGENCIES ON THE HAPPENI NG WHEREOF THE AO OR THE COMMISSIONER (APPEALS) MAY DIRECT PAYMENT OF PENALTY BY THE ASSESSEE. WE ARE CONCERNED HEREWITH THE FUND AMENTALITY PROVIDED IN CLAUSE (C) OF SECTION 271 (1) OF THE ACT, WHICH AUTHORIZES IMPOSITION OF PENALTY WHEN THE AO IS SATISFIED THAT THE ASSESSEE HAS EITHER; (A) CONCEALED THE PARTICULARS OF HIS INCOME; OR (B) FURNISHED INACCURATE PARTICULARS OF SUCH INCOME . 13. IT IS NOT THE CASE OF FURNISHING INACCURATE PAR TICULAR OF INCOME, AS IN THE INCOME TAX RETURN, PARTICULARS OF INCOME HAVE BEEN DULY FURNISHED AND THE SURRENDERED AMOUNT OF INCOME WAS DULY REFLECTED IN THE INCOME TAX RETURN. THE QUESTION IS WHETHER THE PARTICULARS OF INCOME WERE CONCEALED BY THE ASSESSE E OR NOT. IT WOULD DEPEND UPON THE ISSUE AS TO WHETHER THIS CONC EALMENT HAS REFERENCE TO THE INCOME TAX RETURN FILED BY THE ASS ESSEE, VIZ., WHETHER CONCEALMENT IS TO BE FOUND IN THE INCOME TA X RETURN. 14. WE MAY, FIRST OF ALL, REJECT THE CONTENTION OF THE LEARNED COUNSEL FOR THE REVENUE RELYING UPON THE EXPRESSION IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT OCCURRING IN SUB-SECTION (1) OF SECTION 271 OF THE ACT AND CONTENDING THAT EVEN DURING SURV EY WHEN IT WAS FOUND THAT THE ASSESSEE HAD CONCEALED THE PARTI CULAR OF HIS INCOME, IT WOULD AMOUNT CONCEALMENT IN THE COURSE O F ANY PROCEEDINGS . THE WORDS IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT ARE PREFACED BY THE SATISFACTION OF THE AO OR THE COMMISSIONER OF INCOME TAX (APPEALS). WHEN THE SURVE Y IS CONDUCTED BY A SURVEY TEAM, THE QUESTION OF SATISFA CTION OF AO OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER DOES NOT ARISE. WE HAVE TO KEEP IN MIND THAT IT IS THE AO WHO INITIATE D THE PENALTY PROCEEDINGS AND DIRECTED THE PAYMENT OF PENALTY. HE HAD NOT RECORDED ANY SATISFACTION DURING THE COURSE OF SURV EY. DECISION TO INITIATE PENALTY PROCEEDINGS WAS TAKEN WHILE MAKING ASSESSMENT ORDER. IT IS, THUS, OBVIOUS THAT THE EXPRESSION IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT CANNOT HAVE THE REFERENCE TO SURVEY PROCEEDINGS, IN THIS CASE. 15. IT NECESSARILY FOLLOWS THAT CONCEALMENT OF PART ICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULAR OF INCOME BY THE ASSESSEE HAS TO BE IN THE INCOME TAX RETURN FILED BY IT. THERE I S SUFFICIENT INDICATION OF THIS IN THE JUDGMENT OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX, DELHI-I VS. MOHAN DAS HA SSA NAND 141 ITR 203 AND IN RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA), THE SUPREME COURT HAS CLINCHED THIS ASPECT, VIZ., THE A SSESSEE CAN FURNISH THE PARTICULARS OF INCOME IN HIS RETURN AND EVERYTHING WOULD DEPEND UPON THE INCOME TAX RETURN FILED BY THE ASSE SSEE. THIS VIEW GETS SUPPORTED BY EXPLANATION 4 AS WELL AS 5 AND 5A OF SECTION 271 OF THE ACT AS CONTENDED BY THE LEARNED COUNSEL FOR THE RESPONDENT. 16. NO DOUBT, THE DISCREPANCIES WERE FOUND DURING T HE SURVEY. 5 ITA NO.1228/PUN/2016 M/S. MITTAL ENTERPRISES THIS HAS YIELDED INCOME FROM THE ASSESSEE IN THE FO RM OF AMOUNT SURRENDERED BY THE ASSESSEE. PRESENTLY, WE ARE NOT CONCERNED WITH THE ASSESSMENT OF INCOME, BUT THE MOOT QUESTION IS TO WHETHER THIS WOULD ATTRACT PENALTY UPON THE ASSESSEE UNDER THE P ROVISIONS OF SECTION 271(1) (C) OF THE ACT. OBVIOUSLY, NO PENALTY CAN BE IMPOSE D UNLESS THE CONDITIONS STIPULATED IN THE SAID PROVISIONS ARE DU LY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXP OSED DURING SURVEY, MAY BE, IT WOULD HAVE NOT DISCLOSED THE INC OME BUT FOR THE SAID SURVEY. HOWEVER, THERE CANNOT BE ANY PENALTY ONLY ON SURMISES, CONJECTURES AND POSSIBILITIES. SECTION 27 1 (1) (C) OF THE ACT HAS TO BE CONSTRUED STRICTLY. UNLESS IT IS FOUND THAT THERE IS ACTUALLY A CONCEALMENT OR NON-DISCLOSURE O F THE PARTICULARS OF INCOME, PENALTY CANNOT BE IMPOSED. T HERE IS NO SUCH CONCEALMENT OR NON-DISCLOSURE AS THE ASSESS EE HAD MADE A COMPLETE DISCLOSURE IN THE INCOME TAX RETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSES OF TAX. 17. WE, THUS, ANSWER THE QUESTIONS AS FORMULATED AB OVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE FINDING NO FAULT WITH THE DECISIONS OF THE CIT (A) AS WELL AS THE TRIBUNAL. A S A RESULT, THIS APPEAL IS DISMISSED. 6.1 FURTHER, WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ASHOK S. AGARWAL VS. DCIT IN ITA NO.1227/PUN/2016, DATED 05-06-2018 RELIED ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF NANDKISHOR TULSIDAS KATORE VS. ACIT IN ITA NOS.2174 TO 2180/PN/2014, DATED 14-12-2016 FOR THE A.YRS. 2002- 03 TO 2008-09; WHEREIN THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAS PHARMACEUTICALS (SUPRA) WAS FOLLOWED AND EVENTU ALLY ALLOWED THE APPEAL FILED BY THE ASSESSEE. THE DECISIONS RELIE D ON BY THE LD. COUNSEL FOR THE ASSESSEE ALSO SUPPORT THE CASE OF THE ASSES SEE. IN THE INSTANT CASE ALSO, THE SURVEY ACTION GAVE RISE TO THE DISCLOSUR E OF RS.25 LAKHS BEFORE THE END OF THE FINANCIAL YEAR AND DUE DATE FOR FILI NG OF RETURN OF INCOME IS STILL NOT EXPIRED. ON THESE FACTS, IN THE CASE OF SHRI ASHOK S. AGARWAL (SUPRA) AND OTHERS, THE PENALTY U/S.271(1)(C) OF TH E ACT IS NOT FOUND SUSTAINABLE IN LAW. THE LOGIC IS VERY OBVIOUS THAT THE RETURN OF INCOME FILED BY THE ASSESSEE BASED ON THE COMPLETE BOOKS OF ACCOUNT INCLUDING THE TRANSACTIONS RELATING TO THE SAID RS.25 LAKHS, IS NOT ALLEGED TO CONTAIN ANY CONCEALED INCO ME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITH IN THE MEANING OF SECTION 271(1)(C) OF THE ACT. THEREFORE, CONSIDERING THE SETTLED NATURE OF THE IS SUE, WE FIND THE SOLITARY ISSUE RAISED BY THE ASSESSEE HAS TO BE DECIDED IN F AVOUR OF THE ASSESSEE. ACCORDINGLY, THE ORDER OF CIT(A) IS SET ASIDE. THU S, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED . 7. FROM THE ABOVE, WE FIND THE FACTS OF THE PRESENT CASE ON HAND ARE IDENTICAL TO THE ONE DECIDED BY THE TRIBUNAL. THEREFORE, F OLLOWING THE SAME REASONING, WE HOLD THAT THE PENALTY LEVIED BY THE AO AND CONFIRMED 6 ITA NO.1228/PUN/2016 M/S. MITTAL ENTERPRISES BY THE CIT(A) IS UNSUSTAINABLE. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE PENALTY. THE GROUNDS OF APPEAL RAISED BY THE ASSESS EE ARE THUS ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 08 TH DAY OF OCTOBER, 2018. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 08 TH OCTOBER, 2018. SATISH ' ) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-9, PUNE 4. THE PR.CIT-5, PUNE 5. , , ' , / DR, ITAT, A BENCH, PUNE. 6. % / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.