Pramod Kumar Jain, Bargarh V. DCIT, Sambalpur

ITA 131/CTK/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61588 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 16-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-02-2012
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEEDR
• Assessee Lawyers: S N PADHEE
• Keywords: Business income; Depreciation
• Section: 69C; 143(3); 153A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , HONB LE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.N OS.131,132 AND 133/CTK/2012 ( / ASSESSMENT YEAR S 2007 - 08 AND 2008 - 09 1 . SRI PRAMOD KUMAR JAIN , BARGARH 2 . M/S.JRC RESOURCES (P) LTD, C/O.SHRI S.S.AGRAWAL, ADVOCATE, HOSPITAL ROAD, BARGARH. - - - VERSUS - DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), SAMBALPUR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI S.N.PADHEE, AR / FOR THE RESPONDENT: / SHRI . A.BH ATTACHARJEE,DR / DATE OF HEARING: 16.07.2012 / DATE OF PRONOUNCEMENT: 20.07.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER . THESE APPEALS RELATE TO A COMMON ISSUE BEING PENALTY LE VIED U/S.271AAA OF THE INCOME - TAX ACT,1961 IN ITA NOS.131 AND 132/CTK/2012 OF SHRI PRAMOD KUMAR JAIN FOR THE AYS 2007 - 08 AND 2008 - 09 AND IN ITA NO.133/CTK/2012 OF M/S.JRC RESOURCES (P) LTD ., FOR THE ASSESSMENT YEAR 2008 - 09 IN WHICH SHRI PRAMOD KUMAR JAIN I S A DIRECTOR. WE PROPOSE TO DISPOSE ALL THESE APPEALS TOGETHER THE ISSUE BEING COMMON BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD THAT THE ASSESSEE WAS SUBJECTED TO SEARCH AND SEIZU RE OPERATION WHEN DURING THE COURSE OF SEARCH I.T.A.NOS.131,132 AND 133/CTK/2012 2 STATEMENTS WERE TAKEN ON OATH AND ASSESSEE SURRENDERED RESPECTIVE INCOME FOR THE IMPUGNED AYS AND FILED RETURNS DECLARING THE SAME IN THEIR RETURNS PURSUANT TO NOTICE U/S.153A. THE ASSESSING OFFICER ACCEPTED TH E INCOME AS RETURNED BY THE ASSESSEES BEING DISCLOSURE OF ASSETS MADE DURING THE SEARCH OPERATION WHICH IN THE CASE OF PRAMOD KUMAR JAIN HAPPENED TO BE THE ENHANCEMENT IN T HE VALUE OF THE HOUSE CONSTRUCTED AND IN THE CASE OF JRC RESOURCES TOWARDS THE PURCH ASE OF TRUCKS, THE ASSESSEE BEING A TRANSPORTER. ALTHOUGH THE ASSESSING OFFICER DID NOT INITIATE PENALTY PROCEEDINGS IN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007 - 08 AND HAD ACTUALLY CONSIDERED INIT IATION OF PENALTY PROCEEDINGS U /S.271(1)(C). HOWEVER, THE ASSESSING OFFICER CORRECTED HIMSELF IN THE ASSESSMENT YEAR 2008 - 09 FOR PRAMOD KUMAR JAIN AND M/S.JRC RESOURCES WHEN HE INITIATED PENALTY PROCEEDINGS IN THE ASSESSMENT ORDER U/S. 143(3) R.W.S. 153A . THE ASSESSEES ARE TRANSPORTERS AND RETAIL TRADERS IN CEMEN T, ASBESTOS SHEETS AND UNDERTAKE LABOUR CONTRACTS. THE ASSESSING OFFICER AFTER ISSUING SHOW CAUSE U/S.271AAA OBSERVED THAT THE ASSESSEE HAS MADE DISCLOSURE FOR THE RESPECTIVE AMOUNTS BUT FAILED TO SPECIFY THE MANNER IN WHICH SUCH INCOME HA D BEEN DERIVED AN D THEREFORE IN VIEW OF EXPLANATION ( A) TO SECTION 271AAA IMPOSED PENALTY BEING 10% OF THE AMOUNT SURRENDERED U/S.132(4) AS WELL AS ACCEPTED BY THE ASSESSING OFFICER WITH A MINOR DIFFERENCE IN THE CASE OF M/S.JRC RESOURCES WHEN HE SOUGHT TO COMPUTE THE DISC LOSURE PARTLY IN THE HANDS OF THE ASSESSEE SHRI PRAMOD KUMAR JAIN BY REDUCING THE SAME IN THE HANDS OF THE ASSESSEE M/S.JRC RESOURCES P LTD. 3. AGGRIEVED, THE ASSESSEES APPEAL ED BEFORE THE FIRST APPELLATE AUTHORITY WHO SCRUPULOUSLY CONSIDERED THE CASES OF THE ASSESSEES BY HOLDING THAT PENALTY WOULD NOT HAVE BEEN LEVIED ONLY IF ALL THE CONDITIONS OF SECTION I.T.A.NOS.131,132 AND 133/CTK/2012 3 271AAA( 2) ARE SATISFIED. HE AGREED THAT THE ASSESSEE HAD MADE DISCLOSURE, SHOWED IT IN ITS RETURN AND PAID TAX ALONG WITH INTEREST THEREON BUT HAS NOT SU BSTANTIATE D THE MANNER OF DERIVING THE SAME. ON THE BASIS OF REDUCTION IN THE SURRENDERED AMOUNT BY THE ASSESSEE M/S.JRC RESOURCES P LTD., THE LEARNED CIT(A) PARTLY REDUCED THE AMOUNT OF PENALTY FROM 2,22,000 TO 1,90,000 WHEREAS HE CONFIRMED THE PENALT Y OF 2,30,000 FOR THE ASSESSMENT YEAR 2007 - 08 AND 2,42,000 FOR THE ASSESSMENT YEAR 2008 - 09 IN CASE OF THE ASSESSEE SHRI PRAMOD KUMAR JAIN. 4. THE LEARNED COUNSEL FOR THE ASSESSEES SUBMITTED THAT THE ASSESSEE HAD MADE DISCLOSURE U/S.132(4), INCLUDED IT IN ITS RETURN THE SAID AMOUNT AND PAID THE TAX AND INTEREST THEREON. THE DEFINITION OF UNDISCLOSED INCOME HAS BEEN DEFINED IN THE SAID SECTION ITSELF WHEN THE ASSESSING OFFICER TOOK NOTE OF THE FACT THAT THE ASSETS ACQUIRED FROM THE SAID INCOME ARE TO B E IDENTIFIED FOR THE PURPOSE OF ACCEPTING THE UNDISCLOSED INCOME SURRENDERED BY THE ASSESSEE U/S.132(4).THE MANNER WAS ALSO ACCEPTED BY THE ASSESSING OFFICER IN THE LIGHT OF THE FACT THAT THE BUSINESS ENTITIES OF THE ASSESSEE BEING A COMPANY AND THE INDIV IDUALS ARE BEING ACCEPTED BY THE ASSESSING OFFICER WHEN THE LAW PROVIDES THAT THE UNDISCLOSED INCOME IS THE INCOME OF A SPECIFIED PREVIOUS YEAR REPRESENT ED EITHER WHOLLY OR PARTLY BY ANY MONEY, BULLION OR JEWELLERY ETC. HAVING ACCEPTED THE RETURNS WITH THE DECLARED INCOME BEING THE SURRENDERED INCOME, THE ASSESSING OFFICER COULD NOT INSIST ON DEFINING THE MANNER IN WHICH THE SAME WAS GIVEN INSOFAR AS HE HAD ACKNOWLEDGED THAT THE INCOME HAD BEEN IN THE FORM OF TRUCKS AND BUILDINGS WHICH VALUE WAS ENHANCED ON THE BASIS OF PART INCOME GENERATED FROM BUSINESS WAS IDENTIFIED. IF THAT HAD NOT BEEN SO, THE ASSESSING OFFICER OUGHT TO HAVE BROUGHT TO TAX THIS INCOME UNDER THE PROVISIONS OF SECTION 69C I.T.A.NOS.131,132 AND 133/CTK/2012 4 INSOFAR AS THE ENDEAVOR OF THE ASSESSING OFFICER TO CONSIDER THE C ASE OF THE ASSESSEES WAS COMPUTATION OF UNDISCLOSED INCOME . HE POINTED OUT THAT THE MANNER HAS BEEN DEFINED BY THE ACT ITSELF WHEN IT WAS NOT THE SATISFACTION OF THE ASSESSING OFFICER WHICH HAS TO BE BROUGHT O N RECORD ONCE THE MANNER HAS BEEN GIVEN OR DISC LOSED BY THE ASSESSEE. HAVING ACCEPTED THE SURRENDERED INCOME ON THE BASIS OF RETURNS FILED BY THE ASSESSEE, IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO TAX THE SAME U/S.68 APPLIES TO THE MANNER IN WHICH AN INCOME HAS BEEN EARNED WHICH SATISFACTION HAS TO BE REACHED BY THE ASSESSING OFFICER IDENTIFYING THE GENUINENESS, CREDITWORTHINESS ETC. THEREFORE, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON SIMILARLY PLACED FACTS, THIS BENCH OF ITAT, IN THE CASE OF ASHOK KUMAR SHARMA & OTHERS V. DCIT IN A CONSOLIDATED ORDER PRONOUNCED ON 22.12.2011 IN ITA NOS.476 TO 480/CTK/2011, HAS CANCELLED THE PENALTY LEVIED U/S.271AAA , WHICH COPY IS PLACED ON RECORD MAY KINDLY BE CONSIDERED. ON THE LEGAL POINT THEREFORE, HE ALSO RELIED ON THE DECISION OF ITAT, KOLKA TA A BENCH IN THE CASE OF DCIT V. PIONEER MARBLES & INTERIORS P LTD [(92012) 014 ITR (TRIB) 0608] . THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE VIEWS EXPRESSED BY THE TRIBUNAL IN BOTH THE ORDERS INSOFAR AS THE CONDITIONS FOR INVOKING THE PROVISIONS O F SECTION 271AAA AS NOTED IN SUB - SECTION (2) THEREOF HAS TO BE CONSIDERED TOGETHER AND NOT IN ISOLATION. THE CONDITION WITH RESPECT TO THE MANNER SPECIFIC FOR THE PURPOSE OF INVOKING THE PROVISIONS HAS NOT BEEN DEFINED BUT ACCEPTED BY THE ASSESSING OFFICER IN AS MANY WORDS. THE DEFINITION OF UNDISCLOSED INCOME CLARI FI ES THE MANNER INSOFAR AS THE ASSESSING OFFICER AFTER THE SEARCH ONLY CAN INITIATE PENALTY U/S.271AAA WHEN THESE THREE CONDITIONS TOGETHER ARE NOT SATISFIED. PENAL PROVISIONS ARE PUNITIVE AND NOT PART OF THE TAX STRUCTURE INSOFAR AS THE I.T.A.NOS.131,132 AND 133/CTK/2012 5 INTENTION OF THE LEGISLATION WAS NOT TO TAKE 10% OVER AND ABOVE THE TAX AS A MATTER OF LEVY OF PENALTY U/S.271AAA AUTOMATICALLY. TO CONCLUDE HIS ARGUMENT, HE SUBMITTED THAT THE PENALTY HAS BEEN LEVIED BY CREATIN G A FICTION IN THE EXPLANATION THERE TO WHEN THERE WAS NO SPECIFIC FINDING WITH RESPECT TO THE MANNER THE INCOME HAS TO BE DERIVED. THEREFORE HE SUBMITTED THAT LACKING THE MANNER TO BE SATISFIED FOR WHICH NO FORMAT HAS BEEN PRESCRIBED BUT HAVING ACCEPTED T HE RETURNED INCOME AVAILABLE IN THE FORM OF ENTRY IN THE BOOKS OF ACCOUNT WHICH BOTH THE AUTHORITIES BELOW ACKNOWLEDGE ARE IN THE FORM OF TRUCKS WHICH ARE BEING UTILISED FOR THE PURPOSE OF CLAIMING DEPRECIATION AND CONSTRUCTION OF HOUSE WHICH IS BEING UTIL ISED FOR RENDERING INCOME FROM HOUSE PROPERTY AT NO POINT OF TIME CAN BE SUBJECTED TO HAVE BEEN TAXED U/S.69C.HE PRAYED THAT THE PENALTY SO LEVIED MAY KINDLY BE DELETED. 5. THE LEARNED DR OPPOSED THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT HAVING DECL ARED OR SURRENDERED THE INCOME I S SATISFIED BY THE PROCEEDINGS BEING UNDERTAKEN U/S.153A THEREFORE CANNOT BE TAKEN TOGETHER WITH FOR NON - IMPOSITION OF PENALTY AS IT WOULD RESULT IN FUTILITY OF THE VE RY PROVISION OF SECTION 271AAA. THE LAW PROVIDES THAT AT THE TIME OF LEVY OF PENALTY, THE ASSESSEE HAS TO SPECIFY T HE MANNER IN WHICH THE INCOME WAS EARNED. HAD NO SEARCH TAKEN PLACE, THE ASSESSEE WOULD HAVE GON E SCOT FREE EVEN IF THE INCOME WAS GENERATED FROM THE SAME SOURCE WHEN PART OF THE INCOME WAS RENDERED TO TAX BY WAY OF REGULAR BUSINESS INCOME. IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO DETERMINE IN WHICH YEAR THE ASSESSEE HAD EARNED THAT INCOME WHEN THE SPECIFIED PREVIOUS YEAR HAS BEEN DEFINED IN THE ACT . T HEREFORE, THE LE ARNED CIT(A) RIGHTLY CONSIDERED THAT CONDITIONS MENTIONED IN SECTION 271AAA(2) ARE TO BE SATISFIED TOGETHER WAS I.T.A.NOS.131,132 AND 133/CTK/2012 6 JUSTIFIED IN CONFIRMATION OF THE PENALTY SO LEVIED. HE FULLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART OF SUBMISSIONS. 6. WE HA VE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO HOLD THAT NO DEFINITION COULD BE GIVEN TO THE SPECIFIED MANNER INSOFAR AS THE VERY STATEMENT ON OATH U/S.132(4) SPECIFIES THE MANNER ON WHICH THE ASSESSEE IS PREPARED TO PAY TAX THEREON. THE INSCRIBING IN THE BOOKS OF ACCOUNT WAS TAKEN CARE OF BY THE ASSESSEE WHEN HE FILE D THE RETURN S IN PURSUANCE TO NOTICE U/S.153A ACCOUNTING THE ASSETS . THEREFORE, THE CASE LAWS CITED AT THE BAR CLEARLY INDICATE THAT THE PENALTY IS NOT AUTOMATIC IF ONE OF THE PURPORTED CONDITION IS NOT FULFILLED ALTHOUGH ALL THE CONDITIONS HAVE BEEN AGREED TO OF HAVING FULFILLED BY THE ASSESSING OFFICER INSOFAR AS THE TAX AND INTERES T HAS BEEN RECOVERED. PENALTY HAS BEEN LEVIED AFTER THE TAX HAS BEEN RECOVERED THEREFORE ANSWERS THE QUERIES RAISED BY THE LEARNED DR FOR THAT THE SAID PROVISION S BECOME REDUNDANT WAS NOT THE INTENTION OF THE LEGISLATION. THE MANNER , DURING THE SEARCH OPER ATION , IS NOTED BY THE SEARCH PARTY WHICH THE ASSESSING OFFICER HAS ACCEDED TO. THEREFORE, FOLLOWING THE DECISIONS AS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE, WHEREIN THE TRIBUNAL WAS PLEASED TO CONSIDER CANCELLING THE PENALTY SO LEVIED ARE ALS O APPLICABLE TO THE ASSESSEES CASES BEFORE US INSOFAR AS THERE IS NO PRESCRIBED METHOD TO INDICATE THE MANNER IN WHICH INCOME WAS GENERATED WHEN THE DEFINITION OF UNDISCLOSED INCOME HAS BEEN DEFINED IN THE ACT ITSELF WHEN NO INCOME OF THE SPECIFIED PREV IOUS YEAR REPR ESENTED EITHER WHOLLY OR PARTLY W HICH ONUS LAY UPON THE ASSESSEE STOOD DISCHARGED . IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE LEVY OF PENALTY U/S.271AAA IN THE INSTANT CASES ARE NOT JUSTIFIED AND AS SUCH, WE CANCEL THE I.T.A.NOS.131,132 AND 133/CTK/2012 7 PE NALTY SO LEVIED U/S.271AAA FOR THE AYS UNDER CONSIDERATION IN THE CASE OF RESPECTIVE ASSESSEES. 7. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSEES ARE ALLOWED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 20.07.2012 - COPY OF THE ORDER FORWARDED TO: 1 . 1 . / THE APPELLANT : SRI PRAMOD KUMAR JAIN , BARGARH 2 . M/S.JRC RESOURCES (P) LTD, C/O.SHRI S.S.AGRAWAL, ADVOCATE, HOSPITAL ROAD, BARGARH. 2 / THE RESPO NDENT: DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), SAMBALPUR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 16.07.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17.07.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20.07.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.