Deputy Commissioner of Income-tax, V. Autobat Accumulator Pvt. Ltd., Pune

ITA 1305/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7659 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-04-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 13-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Bogus purchase; Initiation of penalty proceedings; Revised return
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.1303 TO 1305/PUN/2016 / ASSESSMENT YEARS : 2010-11 TO 2012-13 DCIT, CIRCLE-1(1), PUNE . /APPELLANT VS. AUTOBAT ACCUMULATOR PVT. LTD., S.NO.36/1/1, PLOT NO.10/11, VADGAON BUDRUK, SINHAGAD ROAD, DIST. PUNE - 411041 PAN : AAFCA4659K . / RESPONDENT ASSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : SHRI MUKESH JHA, JCIT / DATE OF HEARING : 05.04.2018 / DATE OF PRONOUNCEMENT: 18.04.2018 / ORDER PER D. KARUNAKARA RAO, AM : THESE ARE THE 3 APPEALS FILED BY THE REVENUE AGAINST THE SEPARATE ORDERS OF CIT(A)-1, PUNE, COMMONLY DATED 31-03-2016, FOR THE ASSESSMENT YEARS 2010-11 TO 2012-13. 2. REVENUE RAISED SIMILAR GROUNDS IN VERBATIM FOR ALL THE TH REE ASSESSMENT YEARS UNDER CONSIDERATION. THEREFORE, THE GR OUNDS RAISED BY THE REVENUE FOR THE A.Y. 2010-11 ARE EXTRACTED AS UNDER : 1. THE LD.CIT(A) HAS ERRED ON THE FACTS AND CIRCUM STANCES OF THE CASE IN DELETING THE PENALTY U/S.271(1)(C) OF THE ACT AG AINST ADDITIONAL INCOME OFFERED DURING SURVEY U/S.133A AND SUBSEQUENTLY DEC LARED IN RETURN FILED IN RESPONSE TO NOTICE U/S.148 OF THE ACT. 2. THE LD.CIT(A) HAS ERRED ON THE FACTS AND CIRCUMS TANCES OF THE CASE IN RELYING THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATH COTTON AND GINNING FACTORY AND HONBLE MU MBAI TRIBUNAL IN 2 THE CASE OF VIPUL LIFE SCIENCE LTD. IN PRESENT CASE ALTHOUGH THE CASE LAWS ARE NOT APPLICABLE TO FACTS OF THE PRESENT CASE. 3. BRIEFLY STATED RELEVANT FACTS FOR THE A.Y. 2010-11 ARE THAT THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN INDUSTRIAL AND STATIONERY BATTERIES. ASSESS EE FILED THE RETURN OF INCOME ON 05-10-2010 DECLARING TOTAL INCOME OF RS.1,30,65,850/-. BASED ON THE INFORMATION RECEIVED FROM MA HARASHTRA SALES TAX DEPARTMENT, AO NOTICED THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF THE BOGUS/HAWALA PURCHASES. AS PER THE IN FORMATION, ASSESSEE CLAIMED THE PURCHASES OF RS.3,82,30,612/- WITHOUT ACTUALLY RECEIVING THE GOODS. AO ISSUED NOTICE U/S.148 OF THE ACT . THERE WAS ALSO SURVEY ACTION U/S.133A OF THE ACT IN THE BUSINESS P REMISES OF THE ASSESSEE ON 13-08-2013. STATEMENT OF MR. HANUMANTH R EDDY, DIRECTOR OF ASSESSEE COMPANY WAS RECORDED. SURVEY RESULTED IN T HE DISCOVERY OF NON-GENUINE PURCHASES TO THE TUNE OF RS.3,82,30,612/- FOR THE YEAR UNDER CONSIDERATION. THE SAID ADDITIONAL INCOME WAS OFFERED TO TAX. AT THE END OF ASSESSMENT PROCEEDINGS U/S.143(3) R.W.S. 147 OF THE ACT, THE TOTAL INCOME IS DETERMINED AT RS.5,12,96,460/-. FURTHER, AO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ON ACCOUNT OF C ONCEALMENT OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INC OME AND LEVIED PENALTY OF RS.1,29,94,585/-. AGGRIEVED WITH THE ORDER OF AO, ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. IN THE FIRST APPELLATE PROCEEDINGS, ASSESSEE SUBMITTE D VARIOUS SUBMISSIONS IN SUPPORT OF THE ALLEGED BOGUS PURCHASES AMO UNTING TO RS.3,82,30,612/-. THE SAID SUBMISSIONS ARE INCORPORATED IN P ARA NO.6 OF THE ORDER OF CIT(A). ASSESSEE RELIED ON VARIOUS DECISIONS . CONTENTS ON PAGE 14 TO 16 OF THE ORDER OF CIT(A) ARE RELEVANT. A T THE END OF THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) RELYING ON THE JUDG MENT OF 3 HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJ UNATH COTTON & GINNING FACTORY 359 ITR 565 AND THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF VIPUL LIFE SCIENCE LTD. 57 TAXMA NN.COM 25 DELETED THE PENALTY LEVIED BY THE AO BY HOLDING AS UNDER : 10. . . . . . . . . . . . . . . . . . . . . . . . . THEREFORE, CONSIDERING THE FACTUAL ASPECT OF THE CA SE, I.E. MOVEMENT OF GOODS IN STOCK REGISTER, USE OF THE SAME IN MANUFAC TURING PROCESS AND SALE OF MANUFACTURED ITEMS WHICH HAS BEEN DEMONSTRA TED BY THE APPELLANT WITH ADEQUATE RECORDS, IT IS HELD THAT TH E AO WAS NOT JUSTIFIED IN REJECTING THE EXPLANATION OF THE APPELLANT AND L EVYING PENALTY U/S.271(1)(C) OF THE I.T. ACT, 1961 AMOUNTING TO RS .1,29,94,585/-. RELIANCE IS ALSO PLACED ON THE DECISION OF HON. KAR NATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATH COTTON AND GINNING FA CTORY (SUPRA) AND HON.MUMBAI TRIBUNAL IN THE CASE OF VIPUL LIFE SCIEN CES LTD. (SUPRA). ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE PENAL TY OF RS.1,29,94,585/-. ACCORDINGLY, GROUND NO. 1 TO 4 ARE ALLOWED. 5. AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE IS IN AP PEAL BEFORE US CHALLENGING THE DELETION OF PENALTY WITH THE ABOVE-MENTIO NED GROUNDS. SIMILARLY, THE PENALTY OF RS.93,09,593/- AND RS.12,87,027/- AR E LEVIED FOR THE A.YRS. 2011-12 AND 2012-13 RESPECTIVELY. 6. BEFORE US, AT THE OUTSET, LD COUNSEL FOR THE ASSESSE E FILED THE WRITTEN SUBMISSION IN THE FORM OF SYNOPSIS AND DEMONSTRATE D THE FACT OF EXISTENCE OF AMBIGUITY IN THE MIND OF AO AND THE ERRORS IN RECORDING THE SATISFACTION BY THE AO. THEREFORE, HE POINTED OUT THAT A TECHNICAL DEFECT HAS CREPT INTO THE PENALTY MATTERS FOR ALL THE THREE AS SESSMENT YEARS UNDER CONSIDERATION. REFERRING TO THE ISSUE OF RECORDING O F SATISFACTION BY THE AO FOR THE A.Y. 2010-11, LD. COUNSEL FILED THE FOLLOWING LEGAL SUBMISSIONS AND THE SAME ARE EXTRACTED HERE FOR THE SA KE OF COMPLETENESS : 8. THE INVOKING OF BOTH THE LIMBS IS APPARENT FROM PARA 5 AT PAGE NO . 7 OF ORDER U/S 143(3) R.W.S . 147 OF THE ITA, 1961 DATED 16/12/2013 FOR AY 2010-11(KINDLY REFER TO LAST FOUR LINES OF PAGE NO . 7 OF THE PAPER- BOOK) . RELEVANT PORTION IS REPRODUCED BELOW FOR SAKE OF EA SY REFERENCING: 4 ' 05 ................................................ ......................... FURTHER, THE ASSESSEE HAS CONCEALED PARTICULARS OF ITS INCOME AND FURNISHED INACCURATE PARTICULARS OF ITS INCOME, PENALTY PROCEEDINGS UNDER SECTION 271(L)(C) OF THE ACT ARE BEING INITIATED SEPARATELY. ' 9. FURTHER AS PER THE NOTICE U/S 274 R . W.S. 271(L)(C) OF THE ITA, 1961; ASSESSEE WAS SHOW-CAUSED AS TO WHY PENALTY SHOULD N OT BE LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME (I . E . LIMB-L) OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME (I . E. LIMB-2) . THE SAID FACT IS APPARENT FROM NOTICE U/S 274 R . W.S. 271(L)(C) OF THE ITA, 1961 DATED 16/12/2013 FOR AY 2010-11(KINDLY REFER TO PAGE-9 OF THE PAPER BOOK). RELEVANT PORTION IS REPRODUCED BELOW FOR SAKE OF EASY REFERE NCING: ' .......................... * HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FU RNISHED INACCURATE PARTICULARS OF SUCH INCOME. ............................ ' 10. AS PER ORDER U/S 271(1)(C) OF THE ITA, 1961; TH E LEARNED AO APPEARS TO HAVE LEVIED THE CONCEALMENT PENALTY BY R EFERRING TO BOTH THE LIMBS I . E. IIMB-1 AND IIMB-2 STATED ABOVE. THIS WILL BE EVI DENT FROM THE FOLLOWING EXTRACTS. PARA NO. (OF THE PENALTY ORDER) PAGE NO. (OF THE PENALTY ORDER) LINE NO. OF PAGE NO. (OF THE PENALTY ORDER) OBSERVATION REMARK 3 15 LINE - 11 TO LINE-14 IN OTHER WORDS, IT IS CLEAR CUT CASE OF CONCEALING PARTICULARS OF INCOME. ONCE THIS INGREDIENT OF SECTION 271(1)(C) OF THE ACT CONCEALING PARTICULARS OF INCOME IS SATISFIED, PENALTY U/S.271(1)(C) OF THE ACT IS LEVIABLE. LIMB - 1 3 15 LINE - 24 TO LINE-27 THE REVISED RETURN FILED BY THE ASSESSEE DOES NOT HELP TO THE ASSESSEE AS SAME HAS BEEN FILED AFTER DETECTING, CONCEALMENT OF PARTICULARS AND INACCURATE PARTICULARS IN THE RETURN OF INCOME. LIMB - 1 & LIMB-2 3 15 LINE - 35 TO LINE-43 THIS FACT ON ITS OWN, AS A SOLITARY FACTOR MAY NOT BE SUFFICIENT BUT READ IN CONJUNCTION WITH OVERALL CONDUCT OF THE ASSESSEE WOULD DEFINITELY BE A POINTER TO THE FACTUM OF THE ASSESSEE HAVING INDULGED IN AN ACT OF CONCEALMENT OF INCOME IN THE FORM OF BOGUS PURCHASES. IN VIEW OF THE ABOVE FACTS IT IS HELD THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT ONLY WITH A VIEW TO AVOID TAX AND HAS COMMITTED DEFAULT IN VIEW OF PROVISIONS OF SECTION 271(1)(C) AND EXPLANATION THERE OFF, HENCE HE IS LIABLE FOR PENALTY. LIMB - 1 LIMB-2 5 7. IN THIS REGARD, LD. COUNSEL RELIED ON THE FOLLOWING DECISIO NS AND ALSO FILED THE COPIES OF THE ORDERS OF THE TRIBUNAL : 1. JEHANGIR HC JEHANGIR VS. ACIT ITA NO.1261/MUM/201 1, DATED 17- 05-2017 2. SACHIN MANOHAR DESHMUKH VS. ACIT ITA NO.3767/MUM/ 2016, DT. 23-03-2018 8. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUBMITTED TH AT THE AO IS JUSTIFIED IN LEVYING THE PENALTY IN ALL THE ASSESSMENT YEAR S UNDER CONSIDERATION. THEREFORE, LD. DR PRAYED FOR CONFIRMING THE ORDERS OF T HE AO. 9. WE HEARD BOTH THE PARTIES ON THIS LEGAL ISSUE AND PERU SED THE ORDERS OF THE REVENUE ON THE ISSUE OF INITIATION AND LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT, 1961. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE ON THE ISSUE R ELATING TO RECORDING OF SATISFACTION BY THE AO AND THE DECISIONS RELIED UPON BY HIM. ON GOING THROUGH THE ORDERS OF THE REVENUE AND THE WRITTEN SUBMISSIONS OF THE ASSESSEE ON THIS PENALTY ISSUE, WE FIND IT IS A CLEAR CASE THAT THE AO INITIATED THE PENALTY PROCEEDINGS FOR TH E OFFENCE STATING THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF ITS INCO ME AND FURNISHED INACCURATE PARTICULARS OF ITS INCOME (PARA 5 OF THE ASSESSMENT ORDER) AND LEVIED THE SAME STATING THAT AS SESSEE WOULD DEFINITELY BE A POINTER TO THE FACTUM OF THE ASSESSEE HAV ING INDULGED IN AN ACT OF CONCEALMENT OF INCOME IN THE FORM OF BOGUS PURCHASES. (PARA 6.3 OF THE PENALTY ORDER). THEREFORE, IT IS A CASE WH ERE THE AO DID NOT HAVE CLARITY OF THOUGHT AND AO SUFFERED FROM AMBIGUITY IN HIS MIND WITH REGARD TO THE APPLICABLE LIMB OF CLAUSE (C) OF SECTION 271 (1) OF THE ACT TO THE FACTS OF THE CASE. THEREFORE, WE FIND THE P ENALTY ORDER OF THE 6 AO FALLS SHORT OF LEGAL REQUIREMENT ON THE ISSUE OF RECORDING OF SATISFACTION. INITIATION OF PENALTY PROCEEDINGS IS MADE ON B OTH THE LIMBS AND THE PENALTY WAS LEVIED ON ONE LIMB OF CLAUSE (C) OF THE S AID SECTION. SUCH PENALTY ORDER IS UNSUSTAINABLE IN LAW LEGALLY. THIS VIE W WAS ALREADY TAKEN BY THE PUNE BENCH IN A SERIES OF CASES. T HE MANNER OF INITIATING AND LEVYING OF PENALTY WITHOUT MAKING REFERENCE TO THE SPECIFIC LIMB OF CLAUSE (C) IS UNSUSTAINED. AO IS UNDER OBLIGATION TO SP ECIFY THE CORRECT LIMB AT THE TIME OF INITIATION AS WELL AS AT THE TIME OF LEVY OF PENALTY. THEREFORE, THE PENALTY LEVIED BY THE AO IS UNSUS TAINABLE ON TECHNICAL GROUNDS. THIS VIEW OF OURS GET STRENGTH BY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHRI SAMSON PERINCHERY AS WELL AS THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) . 10. FURTHER, WE FIND, IN A RECENT CASE, THE MUMAI BENCH O F THE TRIBUNAL IN THE CASE OF SACHIN MANOHAR DESHMUKH VS. ACIT ITA NO.3767/MUM/2016, DATED 23-03-2018 HAS DEALT WITH AN IDE NTICAL ISSUE AND QUASHED THE PENALTY ORDER OF THE AO. THE OP ERATIONAL PARA NO.12 OF THE ORDER OF THE TRIBUNAL IS EXTRACTED HERE AS UNDER : 12. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO TH E ISSUE BEFORE US, AND AFTER DELIBERATING ON THE FACTS ARE OF THE CONSIDER ED VIEW THAT NOW WHEN THE A.O AFTER RECORDING HIS SATISFACTION HAD INITIA TED THE PENALTY PROCEEDINGS IN THE BODY OF THE ASSESSMENT ORDER FOR FURNISHING INACCURATE PARTICULARS AND CONCEALMENT OF INCOME, THEREFORE, P UTTING THE ASSESSEE TO NOTICE AND CALLING UPON HIM TO EXPLAIN AS TO WHY PE NALTY MAY NOT BE IMPOSED ON HIM UNDER SEC. 271(1)(C) FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, FOL LOWED BY IMPOSING OF PENALTY UNDER SEC. 271(1)(C) IN HIS HANDS FOR FURN ISHING OF INACCURATE PARTICULARS OF INCOME , CAN IN NO WAY BE CONSTRUED AS HAVING FAIRLY PUT THE ASSESSEE TO NOTICE AS REGARDS THE DEFAULT/DEFAU LTS FOR WHICH PENALTY WAS SOUGHT TO BE IMPOSED IN HIS HANDS. WE ARE OF TH E CONSIDERED VIEW THAT A FAILURE ON THE PART OF THE A.O TO CLEARLY PU T THE ASSESSEE TO NOTICE AS REGARDS THE DEFAULT/DEFAULTS FOR WHICH PENALTY U NDER SEC. 271(1)(C) IS SOUGHT TO BE TO BE IMPOSED ON HIM, HAS TO BE VISITE D WITH AND ACCORDED THE SAME TREATMENT AS IN A CASE WHERE THE A.O HAD F AILED TO STRIKE OFF THE IRRELEVANT DEFAULT IN THE SHOW CAUSE NOTICE, BECAUSE, IN BOTH THE SITUATIONS THE ASSESSEE IS NOT INFORMED AND RATHER IS LEFT GUESSING OF THE DEFAULT/DEFAULTS FOR WHICH HE IS BEING PROCEEDED AG AINST FOR. WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS ARE OF A STRONG CONVICTION THAT 7 AS THE A.O HAD CLEARLY FAILED TO DISCHARGE HIS STAT UTORY OBLIGATION OF FAIRLY PUTTING THE ASSESSEE TO NOTICE AS REGARDS THE DEFAU LT/DEFAULTS FOR WHICH HE WAS BEING PROCEEDED AGAINST, THEREFORE, ARE OF T HE CONSIDERED VIEW THAT THE PENALTY UNDER SEC. 271(1)(C) OF RS.12,14,1 40/- IMPOSED BY THE A.O IN CLEAR VIOLATION OF THE MANDATE OF SEC. 274(1 ) OF THE ACT, CANNOT BE SUSTAINED. WE THUS NOT ABLE TO PERSUADE OURSELVES T O SUBSCRIBE TO THE IMPOSITION OF PENALTY BY THE A.O, THEREFORE, SET AS IDE THE ORDER OF THE CIT(A) WHO HAD UPHELD THE SAME. THE PENALTY OF RS.1 2,14,140/-IMPOSED BY THE A.O UNDER SEC.271(1)(C) IS QUASHED IN TERMS OF OUR AFORESAID OBSERVATIONS. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE OPINION THAT THE AO IS NOT JUSTIFIED IN LEVYING THE PENALTY. THUS, WE UPHOLD THE ORDER OF THE CIT(A) DELETING THE PENALTY LEVIED BY THE AO. ACCORDINGLY, REVENUE FAILS ON THIS LEGAL ISSUE. THE GROUNDS RAISED BY THE REVENUE A RE THEREFORE DISMISSED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NOS. 1304 & 1305/PUN/2016 A.YRS. 2011-12 & 2012-13 12. SINCE THE FACTS, ISSUES, DECISION OF THE AO/CIT(A), ARGUMEN TS AND COUNTER ARGUMENTS ARE SAME AS THAT OF APPEAL ITA NO.13 03/PUN/2016 FOR A.Y. 2010-11, THE DECISION GIVEN IN THE SAID A.Y. 2010-11 APPLIES TO THESE ASSESSMENT YEARS TOO. THEREFORE, WITH SIMILAR REASO NING, WE DISMISS THE GROUNDS RAISED BY THE REVENUE FOR THE A.YRS. 2011-12 AND 2012-13 TOO. 13. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF APRIL, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 18 TH APRIL, 2018 8 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-1, PUNE 4. CIT-1, PUNE 5. , , B BENCH PUNE; 6. / GUARD FILE.