Tej Narayan Agarwal, Hyd, Hyderabad V. ITO,Ward-8(2) hyd, Hyderabad

ITA 1288/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2638 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 05-10-2016
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Salary income; Principle of natural justice; Cost of acquisition

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1288/HYD/2016 ASSESSMENT YEAR: 2010-11 SRI TEJ NARAYAN AGARWAL, HYDERABAD. PAN AFFPA0999G VS. THE INCOME TAX OFFICER, WARD NO. 8(2) HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.A. SAI PRASAD REVENUE BY : SMT. SUMAN MALIK DATE OF HEARING : 23-03-2017 DATE OF PRONOUNCEMENT : 12-04-2017 ORDER PER B. RAMAKOTAIAH, AM THIS IS AN APPEAL BY ASSESSEE AGAINST THE CONFIRMATION OF PENALTY ORDER U/S 271(1)(C) OF THE IT ACT, EX-PARTE, BY LD. CIT(A)-2, HYDERABAD DATED 29-06-2016. THERE WAS ONE DAY DELAY IN FILING THE APPEAL. IN THE CONDONATION PETITION, IT WAS STATED THAT THE COUNSEL WAS NOT AVAILABLE ON THAT DAY TO FILE THE PETITION IN TIME. CONSIDERING THE PRAYER THE ONE DAY DELAY IN FILING THE APPEAL IS CONDONED AND APPEAL IS ADMITTED. 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL, AND HAS FILED RETURN OF INCOME ADMITTING TOTAL INCOME OF RS. 4,49,790/-. ASSESSEE HAS INCOME FROM SALARY, INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES. ASSESSEE ALSO HAS DECLARED SHORT TERM CAPITAL GAIN OF RS. 43,917/- WHICH WAS SET OFF TO CARRY FORWARD SHORT TERM CAPITAL LOSS. A.O 2 ITA NO. 1288/HYD/2016 SRI TEJ NARAYAN AGARWAL, HYDERABAD WHILE ASSESSING THE TOTAL INCOME AT THE SAME AMOUNT OF DECLARED INCOME OF RS. 4,49,790/-, HOWEVER, RECALCULATED THE SHORT TERM CAPITAL GAINS ON THE BASIS OF THE DETAILS FURNISHED BY ASSESSEE. WITHOUT GIVING THE DETAILS OF THE SHORT TERM GAINS AND HOW SHORTAGE WAS WORKED OUT, A.O HAS RECOMPUTED THE SHORT TERM CAPITAL GAIN BY STATING IN THE ASSESSMENT ORDER AS UNDER: ON THE VERIFICATION OF SAID DETAILS, IT IS OBSERVED THAT THE CAPITAL GAINS ACCRUED TO ASSESSEE OR RS. 3,66,047/- BUT NOT RS. 43,917/- AS ADMITTED BY ASSESSEE. 3. THIS WAS ACCEPTED BY ASSESSEE BY STATING THAT BY OVERSIGHT, THE SHORT TERM CAPITAL GAINS ON ASTOM PROJECTS WAS SHORT ADMITTED AT THE TIME OF FILING RETURN OF INCOME. SINCE ASSESSEE HIMSELF HAD ACCEPTED THE DIFFERENCE AMOUNT OF RS. 3,22,130/-, AO ADDED THE SAME TO THE INCOME RETURNED BY ASSESSEE. HOWEVER, THERE ARE LOSSES CARRIED FORWARDED AND THE SAID LOSSES WERE SET OFF AGAINST THE ENHANCED CAPITAL GAINS. THERE IS NO CHANGE TO THE TOTAL INCOME RETURNED BY ASSESSEE. HOWEVER, A.O INITIATED PENALTY PROCEEDINGS FOR CONCEALING/ FURNISHING INACCURATE PARTICULARS OF INCOME. ACCORDINGLY A NOTICE HAS BEEN ISSUED U/S 271(1)(C) OF THE IT ACT DATED 25-02-2013. A.O FINALIZED THE PENALTY U/S 271(1)(C) OF THE IT ACT AND LEVIED PENALTY, TREATING THE DIFFERENCE IN SHORT TERM CAPITAL GAIN WORKED OUT AND ADMITTED AND CALCULATING THE TAX SOUGHT TO BE EVADED ON THAT, LEVIED A ROUND SOME MINIMUM PENALTY OF RS. 1,10,000/-. 3 ITA NO. 1288/HYD/2016 SRI TEJ NARAYAN AGARWAL, HYDERABAD 4. EVEN THOUGH ASSESSEE CONTESTED BEFORE LD. CIT(A), NONE APPEARED BEFORE CIT(A) AND LD. CIT(A) WITHOUT SPECIFYING THE DATES OF POSTING DECIDED THE APPEAL, EX- PARTE, AND CONFIRMED THE PENALTY U/S 271(1)(C) OF THE IT ACT. AGGRIEVED ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT(A) CONFIRMING THE PENALTY OF RS. 1,10,000/- LEVIED U/S 271(1)(C) OF THE IT ACT IS NOT CORRECT EITHER ON FACTS OR IN LAW AND IN BOTH. 2. THE LEARNED FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE FACT THAT SINCE THE APPELLANT HAD SUFFICIENT BROUGHT FORWARD LOSSES THE ADDITION TO SHORT TERM CAPITAL GAINS HAS NO BEARING ON TAX LIABILITY AND HENCE THE UNDERSTATEMENT OF SHORT TERM CAPITAL GAIN COULD HAVE BEEN ACCEPTED AS AN ACCOUNTING MISTAKE ONLY. 3. THE LEARNED FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE FACT THAT THE APPELLANT HAD NOT INTENTION TO AVOID ANY LEGITIMATE TAXES. 4. THE APPELLANT CRAVES FOR LEAVE TO ADD OR AMEND OR ALTER ANY OF THE GROUNDS AT THE TIME OF HEARING OF APPEAL. 5. IN THE PRESENT PROCEEDINGS, ASSESSEE HAS RAISED AN ADDITIONAL GROUND AS UNDER: IN THE ABSENCE OF SPECIFIC CHARGE RAISED BY THE A.O IN THE NOTICE U/S 271(1)(C), THE LEVY OF PENALTY U/S 271(1)(C) IS NOT VALID. 6. IT WAS THE CONTENTION THAT A.O HAS NOT SPECIFIED THE REASONS FOR INITIATING PENALTY PROCEEDINGS WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING THE INACCURATE PARTICULARS OF INCOME. REFERRING TO THE NOTICE ISSUED, IT WAS SUBMITTED THAT THE STANDARD PROFORMA NOTICE WAS ISSUED WITHOUT SPECIFYING THE NATURE OF INCOME WHICH HAS ESCAPED ASSESSMENT AND RELIED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY [359 ITR 565] FOR THE PROPOSITION 4 ITA NO. 1288/HYD/2016 SRI TEJ NARAYAN AGARWAL, HYDERABAD THAT WHEN THE NOTICE DOES NOT SPECIFY THE NATURE OF CONCEALMENT, THE PRINCIPLES OF NATURAL JUSTICE WERE OFFENDED AND NO PENALTY CAN BE IMPOSED ON ASSESSEE. APART FROM THAT, THE LD. COUNSEL ALSO POINTED OUT THAT THERE IS NO ESCAPEMENT OF INCOME AS A.O ACCEPTED THE INCOME RETURNED AS SUCH AND ONLY THE CARRY FORWARD LOSSES HAVE BEEN ADJUSTED. 7. LD. DR RELIED ON THE ORDERS OF THE A.O. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES. AS SEEN FROM THE ASSESSMENT ORDER, THE FACT IS THAT THERE IS NO CHANGE TO THE RETURNED INCOME. IT IS TRUE THAT THE SHORT TERM CAPITAL GAIN HAS BEEN REWORKED OUT BASED ON THE PARTICULARS FURNISHED BY ASSESSEE, HOWEVER, ADMITTEDLY THERE IS SOME SHORT COMPUTATION WHICH A.O BROUGHT TO TAX. A.O HIMSELF STATED IN THE ORDER AS AN OVERSIGHT BY ASSESSEE AND THE DIFFERENCE WAS BROUGHT TO TAX. NOWHERE IN THE ORDER, HOW THE SAME WAS COMPUTED WAS SPECIFIED. AS SEEN FROM THE GROUNDS BEFORE CIT(A), ASSESSEE STATES THAT THE DIFFERENCE AROSE DUE TO ADOPTION OF A DIFFERENT COST OF ACQUISITION AS ON 01-04- 1981. IF THAT IS TO BE CONSIDERED, CERTAINLY THE COMPUTATION WOULD BE UNDER THE HEAD LONG TERM CAPITAL GAIN BUT NOT UNDER SHORT TERM CAPITAL GAIN. OBVIOUSLY THERE SEEM TO BE SOME MISTAKE, EITHER IN THE COMPUTATION BY A.O OR IN THE SUBMISSION OF ASSESSEE BEFORE CIT(A). BE THAT AS IT MAY, WE ARE OF THE OPINION THAT PENALTY U/S 271(1)(C) OF THE IT ACT CANNOT BE LEVIED ON THE FACTS OF THE CASE. 5 ITA NO. 1288/HYD/2016 SRI TEJ NARAYAN AGARWAL, HYDERABAD 9. PROVISIONS OF SEC. 271(1)(C) ARE APPLICABLE ONLY WHEN, IF A.O IN THE COURSE OF ANY PROCEEDINGS, IS SATISFIED THAT ANY PERSON (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME/ FURNISHED IN ACCURATE PARTICULARS OF SUCH INCOME. IF THE FACTS FALL INTO ABOVE TWO CATEGORIES, HE MAY DIRECT SUCH PERSON SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX IF ANY PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. EXPLANATION-4 AS APPLICABLE FOR THE ASSESSMENT YEAR IS AS UNDER: EXPLANATION 4: FOR THE PURPOSES OF CLAUSE (III) OF THIS SUB-SECTION, THE EXPRESSION THE AMOUNT OF TAX SOUGHT TO BE EVADED (A) IN ANY CASE WHERE THE AMOUNT OF INCOME IN RESPEACT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAS THE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN OR CONVERTING THAT LOSS INTO INCOME, MEANS THE TAS THAT WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAD SUCH INCOME BEEN THE TOTAL INCOME; (B) IN ANY CASE TO WHICH EXPLANATION 3 APPLIES, MEANS THE TAX ON THE TOTAL INCOME ASSESSED AS REDUCED BY THE AMOUNT OF ADVANCE TAX, TAX DEDUCTED AT SOURCE, TAX COLLECTED AT SOURCE AND SELF-ASSESSMENT TAX PAID BEFORE THE ISSUE OF NOCICE UNDER SECTION 148; (C) IN ANY OTHER CASE, MEANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED. 9.1 THUS IN THE CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THE 6 ITA NO. 1288/HYD/2016 SRI TEJ NARAYAN AGARWAL, HYDERABAD EXPRESSION THE AMOUNT OF TAX SOUGHT TO BE EVADED HAS TO BE CALCULATED EITHER IN UNDER (A) OR UNDER (B) OR UNDER (C). AS CAN BE SEEN FROM THE FACTS OF THE CASE, ASSESSEE HAS NOT FURNISHED ANY LOSS RETURN, THEREFORE, THE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN OR CONVERTING THAT LOSS INTO INCOME UNDER CLAUSE-(A) DOES NOT ARISE. THIS IS NOT A CASE WHERE EXPLANATION-3 HAS BEEN INVOKED, SO CLAUSE (B) DOES NOT APPLY. AS FAR AS CLAUSE-(C) IS CONCERNED, THERE IS NO DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND TAX ON THE RETURNED INCOME, AS A.O ACCEPTED THE RETURNED INCOME RS. 4,49,790/-. THUS ON THE FACTS OF THE CASE, THERE IS NO MECHANISM TO DETERMINE THE AMOUNT OF TAX SOUGHT TO BE EVADED IN THIS CASE, AS THE SHORT TERM CAPITAL GAIN DECLARED IS ACCEPTED AS ZERO, EVEN THOUGH THE CARRIED FORWARD LOSSES GOT REDUCED IN THE COMPUTATION. SINCE EXPLANATION-4 CANNOT BE INVOKED, QUESTION OF DETERMINING THE AMOUNT OF TAX SOUGHT TO BE EVADED DOES NOT ARISE IN THIS CASE. THEREFORE, THERE CAN BE NO PENALTY U/S 271(1)(C) OF THE IT ACT, WHERE THE RETURNED INCOME IS ACCEPTED AS SUCH. 10. EVEN THOUGH LD. COUNSEL PLACED ON RECORD THE COORDINATE BENCH DECISION IN THE CASE OF SHRI MULA CHANDRA MOHAN GOUD IN ITA NO. 594/HYD/2016 DATED 30- 12-2016, WHEREIN ISSUANCE OF STANDARD PROFORMA WAS DISCUSSED. IN THIS CASE ALSO THE NOTICE PLACED ON RECORD INDICATE THAT IT WAS ISSUED WITHOUT SPECIFYING WHETHER IT WAS FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. WE ARE OF THE OPINION THAT THERE IS NO NEED TO BE CONSIDER THE ABOVE CONTENTION, AS ON THE 7 ITA NO. 1288/HYD/2016 SRI TEJ NARAYAN AGARWAL, HYDERABAD FACTS OF THE CASE, NO PENALTY CAN BE LEVIED, SINCE THE RETURNED INCOME IS ACCEPTED AS SUCH. IN VIEW OF THE ABOVE, WE CANCEL THE PENALTY AND ALLOW ASSESSEE GROUNDS. THE ADDITIONAL GROUND HOWEVER IS TREATED AS ACADEMIC AND WAS NOT ADMITTED. ACCORDINGLY, ASSESSEES GROUNDS ARE ALLOWED. 11. IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2017. SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 12 TH APRIL, 2017. KRK 1) SHRI TEJ NARAYAN AGARWAL C/O. CH. PARTHASARATHY & CO 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1, ASHOK NAGAR, HYDERABAD-500 020. 2) ITO, WARD NO-8(2), HYDERABAD. 3) CIT(A) -2, HYDERABAD 4) PCIT-2, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6) GUARD FILE