Santosh Hastimal Gugale, Ahmednagar V. Assistant Commissioner of Income-tax,

ITA 1334/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7628 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Assessee Lawyers: HARI KRISHAN
• Section: 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VI KAS AWASTHY, JM . / ITA NOS. 1334 & 1335/PUN/2016 / ASSESSMENT YEARS : 2010-11 & 2011-12 SHRI SANTOSH HASTIMAL GUGALE, AT 4253, CHITALE ROAD, DIST. AHMEDNAGAR PAN : AEAPG2716G . /APPELLANT VS. ACIT, AHMEDNAGAR CIRCLE AHMEDNAGAR . / RESPONDENT ASSESSEE BY : SHRI HARI KRISHAN REVENUE BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 26.04.2018 / DATE OF PRONOUNCEMENT: 04.05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE TWO APPEALS FILED BY THE ASSESSEE UNDER CONS IDERATION. THEY ARE FILED AGAINST THE SEPARATE ORDERS OF CIT(A)-2, PU NE, COMMONLY DATED 16-03-2016 FOR THE ASSESSMENT YEARS 2010-11 AND 2011 -12. 2. IDENTICAL GROUNDS HAVE BEEN RAISED BY THE ASSESSEE. THEREFORE, THE GROUNDS RAISED FOR A.Y. 2010-11 ARE EXTRACTED HERE AS UNDER : THE FOLLOWING GROUNDS OF APPEAL ARE TAKEN INDEPEND ENTLY AND WITHOUT PREJUDICE TO ONE ANOTHER. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THE ORDER OF THE ASSESSING OFFICER LEVYING PENALTY OF RS.1,18 ,875/- UNDER SECTION 271 (1)(C) OF THE INCOME TAX ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HO LDING THAT THE ASSESSEE WAS LIABLE FOR CONCEALING THE PARTICULARS OF INCOME. 2 3.(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NO T APPRECIATING THAT THERE WAS NO NEGATIVE CASH BALANCE OF RS.3,84,719/- IN THE PROFIT AND LOSS ACCOUNT FINALLY PREPARED, WHICH FACT IS EVIDEN T FROM THE PROFIT AND LOSS ACCOUNT FILED BY THE ASSESSEE ALONG WITH ITS R ETURN OF INCOME. (B) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NO T APPRECIATING THAT THE ADDITIONAL INCOME OF RS.3,84,719/- OFFERED BY T HE ASSESSEE IN ANSWER TO QUESTION NO. 28 OF HIS STATEMENT RECORDED ON 01- 11-2012 DURING THE SURVEY OPERATION IN RESPECT OF WHICH THE PENALTY HA S BEEN LEVIED, WAS OFFERED ON THE BASIS OF ONLY A HURRIEDLY ' PREPARED PROVISIONAL STATEMENT OF INCOME AND EXPENDITURE THAT CANNOT BE RELIED UPON T O LEVY THE PENALTY UNDER SECTION 271 (1 )(C) OF THE INCOME TAX ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD . COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERR ED IN NOT APPRECIATING THAT THE ADDITIONAL INCOME OF RS.3,84, 719/- OFFERED BY THE ASSESSEE IN ANSWER TO QUESTION NO. 28 OF HIS STATEM ENT RECORDED ON 01- 11-2012 DURING THE SURVEY OPERATION WAS MADE ONLY ON THE BASIS OF THE NEGATIVE CASH BALANCE OF RS.3,84,719 AS PER THE PRO VISIONAL INCOME AND EXPENDITURE STATEMENT PREPARED HURRIEDLY DURING THE SURVEY OPERATION. THE ADDITIONAL INCOME OF RS.3,84,719/- WAS NOT OFFE RED ON THE BASIS OF ANY INVESTMENT IN LAND OUT OF THE UNDISCLOSED SOURC ES OF INCOME AS ALLEGED BY THE ASSESSING OFFICER IN PARA 4 ON PAGE 4 OF THE ORDER DATED 27-08-2014 LEVYING THE PENALTY UNDER SECTION 271 (1 )(C) OF THE INCOME TAX ACT AND ACCEPTED AS SUCH BY THE CIT (A) IN PARA 4 O N PAGE 12 OF HIS APPELLATE ORDER. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NO T APPRECIATING THAT PENALTY LEVIED UNDER SECTION 271 (1)(C) OF THE ACT IN THIS CASE CANNOT BE SUSTAINED BECAUSE THE ASSESSMENT ORDER PASSED IN TH IS CASE IS WITHOUT JURISDICTION AND BAD IN LAW BECAUSE THE PENALTY ORD ER IS BASED ON THE REASSESSMENT NOTICE ISSUED UNDER SECTION 148 OF THE INCOME TAX ACT WITHOUT FULFILLING THE MANDATORY PRECONDITION OF RE CORDING REASONS TO BELIEVE THAT CERTAIN INCOME CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NO T APPRECIATING THAT WHILE INITIATING THE PENALTY BY ISSUING NOTICE UNDE R SECTION 274 R.W.S. 271 (1)(C) OF THE ACT THE ASSESSING OFFICER IS NOT SURE AS TO FOR WHICH SPECIFIC CHARGE THE PENALTY IS BEING INITIATED. HE HAD ISSUE D THE NOTICE FOR EITHER OF THE CHARGES CONTAINED IN SECTION 271 (1)(C) OF T HE INCOME TAX ACT. AS SUCH THE CONSEQUENT PENALTY ORDER PASSED UNDER S ECTION 271 (1)(C) OF THE ACT LEVYING PENALTY OF RS.1,18,875/- IS UNLAWFU L AND AB-INITIO VOID. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NO T APPRECIATING THAT THE PENALTY OF RS.1,18,875/- LEVIED BY THE ASSESSIN G OFFICER UNDER SECTION 271 (1)(C) OF THE ACT IS NOT JUSTIFIED FOR THE REASONS THAT THE OFFER OF ADDITIONAL INCOME OF RS.3,84,719/- MADE BY THE ASSE SSING OFFICER WAS SUBJECT TO THE CONDITION THAT THE PENALTY SHOULD NO T BE INITIATED. 8. THE APPELLANT CRAVES LEAVE TO DELETE OR TO MODIF Y, ALTER OR AMEND ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, OR TO AD D ANY OTHER GROUND/GROUNDS OF APPEAL. 3 3. BRIEFLY STATED, RELEVANT FACTS ARE THAT THE ASSESSEE IN AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF SALE AND PURCHASE OF PLO TS. ASSESSEE FILED THE RETURN OF INCOME ON 17-12-2012 DECLARING TOTAL INC OME OF RS.6,36,380/-. DURING THE PROCEEDINGS BEFORE US, LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THIS IS A CASE WHERE SURVEY ACTION U/S.13 3A OF THE ACT WAS TAKEN PLACE ON 01-11-2012. ASSESSEE DID NOT MAINTA IN THE BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION. DURING THE SURVEY PROCEEDINGS, PROVISIONAL BOOKS OF ACCOUNT ALONG WITH FINANCIAL STATEMENTS WERE ONLY PREPARED BY THE ASSESSEE. THIS EXERCISE RESULTED IN DISCOVERY OF NEGATIVE CASH BALANCES OF 3,84,719/- FOR THE A.Y. 2010- 11 AND RS.24,48,861/- FOR THE A.Y. 2011-12. ON THE CONDIT ION THAT THE PENALTY FOR CONCEALMENT OF SAID NEGATIVE CASH BALANCES U/ S.271(1)(C) OF THE ACT SHALL NOT BE LEVIED BY THE AO, THE ASSESSEE OFFE RED THE SAID NEGATIVE CASH BALANCES AS INCOME OF THE ASSESSEE FOR THE SAID ASSESSMENT YEARS. COMPLYING WITH THE SAME, ASSESSEE FILED THE RETURN OF INCOME FOR THE YEARS UNDER CONSIDERATION AND ASSESSME NTS HAVE BECOME FINAL ON THIS ASPECT. THUS, NO APPEALS WERE FILED BY THE ASSESSEE BEFORE THE CIT(A). SUBSEQUENTLY, THE AO INITIATED THE PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME AND LEVIED THE PENAL TY FOR BOTH THE YEARS. DURING THE FIRST APPELLATE PROCEEDINGS, CIT(A) C ONFIRMED THE SAME. THEREFORE, THE ASSESSEE FILED THE PRESENT APPEALS FOR BOTH THE ASSESSMENT YEARS. 4. ELABORATING THE ABOVE FACTS, LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT IT IS A CASE OF BREACH OF AGREEMENT BETW EEN THE ASSESSEE AND THE AO AND THE CONDITIONS SET BY THE ASSESSEE DUR ING THE SURVEY ACTION WERE NOT HONOURED BY THE AO IN MATTERS RELATING TO LEVY OF PENALTY U/S.271(1)(C) OF THE ACT IN BOTH THE ASSESSMENT YEA RS. FURTHER, 4 MENTIONED THAT THIS IS A CASE WHERE THE SAID NEGATIVE CA SH BALANCES WERE ARRIVED AT BASED ON THE PROVISIONAL CASH BOOKS AND FINANCIAL STATEMENTS. ON THE NEGATIVE CASH BALANCE FIGURES, LD. COU NSEL MENTIONED THAT THE SAID NEGATIVE CASH BALANCES DID NOT A RISE. FURTHER, ON THE CORRECTNESS OF THE AUDITED BOOKS OF ACCOUNT/FINAN CIAL STATEMENTS, ASSESSEE IMPLIES THAT THE SAID NEGATIVE CASH BALANCE FIGURES ARE MERE ESTIMATES. IN THAT CASE, THE ADDITION SO MADE BY THE AO ON ACCOUNT OF NEGATIVE CASH BALANCES CONSTITUTES ESTIMATION IN WHICH CASE, THE PENALTIES U/S.271(1)(C) OF THE ACT ARE NOT LEVIABLE AND T HEREFORE, THE PENALTIES RELATED TO THE ESTIMATED ADDITIONS ARE UNSUSTAIN ABLE IN LAW FOR BOTH THE ASSESSMENT YEARS. 5. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUBMITTED THAT THIS IS A CASE WHERE CASH BALANCES WAS FINALLY ARRIVED AT IN THE PRESENCE OF THE DEPARTMENTAL AUTHORITIES BY THE ASSESSEE AND THE ASSES SEE DID NOT DISPUTE THE SAME BY STATING THAT THE SAME CONSTITUTES AN ADHOC ESTIMATIONS. THE FACT THAT THE ASSESSEE DECLARED THE SAM E IN THE RETURN OF INCOME ASSUMES SIGNIFICANT. THEREFORE, THE LD. COUNSEL FOR THE ASSESSEE CANNOT RAISE THIS ISSUE ON THE GROUND OF ESTIMA TIONS AND THE PENALTIES LEVIED BY THE AO AND CONFIRMED BY THE CIT(A) IN TO TO FOR BOTH THE ASSESSMENT YEARS ARE SUSTAINABLE IN THE HANDS OF THE ASSESSE E. 6. WE HEARD BOTH THE PARTIES ON THIS ISSUE AND PERUSED THE ORDERS OF THE REVENUE. REGARDING THE ARGUMENT RELATING TO ESTIMATIO NS, WE FIND THE FACT THAT THE FIGURES ARE FINALLY ARRIVED AT BY THE AS SESSEE. AO ALSO ACCEPTED THE SAME AND THEREFORE, THE SAME CANNOT CONS TITUTE ESTIMATIONS. IT IS NOT THE CASE OF THE ASSESSEE THAT C ORRECT FIGURES ARE DIFFERENT. INFACT, THE RETURN OF INCOME DOES NOT INDICATE THAT THE SAID INCOME OFFERED BY THE ASSESSEE ON ACCOUNT OF NEGATIVE CA SH BALANCES DURING SURVEY ACTION ARE MERE ESTIMATIONS. THEREFORE, TH IS PART OF THE 5 ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE IS UNSUSTAI NABLE AND THEREFORE, THE SAME IS DISMISSED. 7. REGARDING NON-ADHERING TO THE CONDITIONS SET BY THE ASSESSEE FOR OFFERING OF THE ADDITIONAL INCOME, WE ARE OF THE OPINION THAT T HE INCOME SO DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME IS FIN AL. AS SUCH, THERE IS NO INDICATION SPECIFIED IN THE RETURN THAT THE SAID RETURNED INCOME IS SUBJECT TO THE CONDITIONS ON NON-LEVY OF PENALTY. FURTHER, IT IS NOT THE CASE OF THE ASSESSEE THAT THE SAID PROVISIONAL FIG URES SO ARRIVED AT ARE FALSE AND THERE IS EVIDENCE TO DEMONSTRATE THE S AME. FROM THESE ANGLES ALSO, THIS PART OF THE ARGUMENT OF LD. COUNSEL FOR T HE ASSESSEE IS ALSO UNSUSTAINABLE AND THEREFORE, IT IS DISMISSED. FURTHER, WE PERUSED THE FINDING GIVEN BY THE CIT(A) ON THIS ISSUE AND FIND IT RELE VANT TO EXTRACT THE SAME HERE AS UNDER : 4.3 I HAVE GIVEN MY THOUGHTFUL CONSIDERATION TO TH E FACTS OF THE CASE AS WELL AS DECISION CITED AND I AM UNABLE TO AGREE WIT H THE ARGUMENTS TAKEN ON BEHALF OF THE APPELLANT FOR THE FOLLOWING REASON S : I. THE APPELLANT DID NOT FILE ANY RETURN OF INCOME SIN CE THE A.Y. 2008- 09 ONWARDS, EVEN THOUGH HIS INCOME EXCEEDED THE MAX IMUM EXEMPTION LIMIT. II. THE RETURN WAS FILED ONLY AFTER THE SURVEY WAS COND UCTED U/S.133A OF THE I.T. ACT. III. THE ADDITIONAL INCOME WAS DETECTED ONLY DUE TO THE SURVEY OPERATION AND IF THERE HAD BEEN NO SUCH ACTION THEN THE APPELLANT WOULD HAVE CERTAINLY ESCAPED THE TAX LIABILITY ON T HE ADDITIONAL INCOME. IV. THUS, THE ADDITIONAL INCOME WAS ADMITTED ONLY AFTER THE DETECTION OF THE SAME DURING THE SURVEY. V. THE APPELLANT IS A WELL EDUCATED PERSON AND IS A PR ACTICING LAWYER. IT WAS EXPECTED OF HIM TO BE MORE LAW ABID ING PARTICULARLY BEING IN LEGAL PROFESSION. VI. HIS CONDUCT SHOWS THAT HE DELIBERATELY AVOIDED TO F ILE RETURN OF INCOME AND AVOIDED TO PAY TAX ON THE INCOME EARNED BY HIM. 4.3.1 THE ARGUMENT THAT DISCLOSURE WAS MADE TO BUY PEACE AND AVOID LITIGATION IS ALSO NOT ACCEPTABLE IN VIEW OF NUMBER OF DECISIONS ON THIS ISSUE. WHERE THE ASSESSEE HIMSELF VOLUNTARILY CONC EDES THAT A PARTICULAR ITEM OF INCOME HAD BEEN CONCEALED BY HIM AND SURREN DERS SUCH INCOME FOR THE PURPOSE OF ASSESSMENT, THERE IS NOTHING LEF T FOR THE DEPARTMENT TO 6 PROVE THE FACTUM OF IT BEING ASSESSEES INCOME AND ALSO THE FACTUM OF IT HAVING BEEN CONCEALED BY HIM. IN SUCH CASES, SUCH CONCESSION BY THE ASSESSEE MAY AFFORD SOUND FOUNDATION FOR THE IMPOSI TION OF PENALTY. THIS PROPOSITION HAS BEEN LAID BY THE HONBLE DELHI HIGH COURT IN THE CASE OF DURGA TIMBER WORKS VS. CIT (79 ITR 63) (DEL.) AND A LSO BY HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BANARAS CHEMICA L FACTORY VS. CIT (108 ITR 96) (ALL.) . . . . . . . . . . . . . . . . . . . . 4.3.6 IN THE LIGHT OF THE AFORESAID DISCUSSION ON T HE FACTS, PROVISION OF SEC.271(1)(C) R.W. EXPLANATION-1 AND DECISION CITED I HOLD THAT THE APPELLANT WAS CLEARLY LIABLE FOR CONCEALING THE PAR TICULARS OF INCOME WHICH WAS DETECTED DUE TO SURVEY OPERATION U/S.133A OF THE I.T. ACT. THE ADMISSION WAS MADE BY HIM ONLY WHEN THE FACTS WERE DULY CONFRONTED WITH HIM. CONSIDERING THE FACT THAT THE APPELLANT DELIBERATELY AVOIDED TO FILE RETURN OF INCOME PARTICULARLY KEEPING IN VIEW OF THE FACT THAT HE IS A WELL EDUCATED PERSON AND A LAWYER BY PROFESSION, HE DOES NOT DESERVE ANY LENIENCY WITH REGARD TO PENALTY PROCEEDING. I THEREFORE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE ASSES SING OFFICER IN LEVYING PENALTY U/S.271(1)(C) OF RS.1,18,875/- BEING 100% O F THE TAX SOUGHT TO BE EVADED. ACCORDINGLY, THE ORDER OF THE ASSESSING OF FICER IS CONFIRMED. FROM THE ABOVE, WE ARE OF THE OPINION THAT THE ORDER OF CIT(A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. 8. REASONING OF THE CIT(A) FOR OTHER ASSESSMENT YEAR IS A LSO SIMILAR. CONSIDERING THE COMMONALITY OF THE ARGUMENTS OF LD. COUNSE L, THE PENALTIES LEVIED BY THE AO FOR BOTH THE ASSESSMENT YEARS , I.E. A.Y. 2010- 11 & 2011-12 ARE CONFIRMED. ACCORDINGLY, THE GROUNDS RAI SED BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS ARE DISMISSED. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04 TH DAY OF MAY, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 04 TH MAY, 2018 7 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// SENIOR PRIVA TE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-2, PUNE 4. CIT-2, PUNE 5. , , B BENCH PUNE; 6. / GUARD FILE.