Shri chandrbhan M.Ugale, Nashik V. ACIT, Nashik

ITA 1399/PUN/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0985 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAVE
• Keywords: Principle of natural justice; Valuation report; Bogus loan
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1399/PN/2012 %' ( ')( / ASSESSMENT YEAR : 2007-08 SHRI CHANDRBHAN M. UGALE, 22, MANAS, MAHATMA NAGAR, NASHIK 422008. PAN : AABPU1429L ....... / APPELLANT ' / V/S. ACIT, CENTRAL CIRCLE 2, NASHIK / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI HITENDRA NINAVE / DATE OF HEARING : 03-09-2015 / DATE OF PRONOUNCEMENT : 30-10-2015 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, NASHIK DATED 15-0 5-2012 CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) IN THE ASSES SMENT YEAR 2007-08. 2 ITA NO. 1399/PN/2012, A.Y. 2007-08 2. THE BRIEF FACTS OF THE CASE ARE : THE ASSESSEE HAD P URCHASED LAND MEASURING 1.11 HECTARE FROM ONE SHRI GOVIND SITARAM DHEM SE. THE SALE CONSIDERATION OF THE LAND AS PER REGISTERED SALE DEED IS RS.12,50,000/-. THE ASSESSEE FILED HIS RETURN OF INCOME FOR T HE ASSESSMENT YEAR 2007-08 ON 29-10-2007 DECLARING INCOM E OF RS.30,33,797/-. DURING THE COURSE OF SCRUTINY ASSESSMENT THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD MADE CASH P AYMENT OF RS.25,28,000/- AS ON-MONEY OVER AND ABOVE THE SALE CO NSIDERATION OF RS.12,50,000/- TO SHRI DHEMSE. SHRI DHEMSE ALLEGEDLY ADMITT ED THE RECEIPT OF CASH RS.25,28,000/- FROM THE ASSESSEE AS PART OF SALE CONSIDERATION. THE ASSESSEE DENIED ANY CASH PAYMENT O F RS.25,28,000/- FOR PURCHASE OF THE AGRICULTURAL LAND. THE M ATTER WAS REFERRED TO DVO TO DETERMINE THE COST OF LAND. THE DVO D ETERMINED THE COST OF LAND AT RS.33,30,000/-. THE ASSESSING OFFICER MADE A DDITION OF RS.20,80,000/- I.E. THE DIFFERENCE BETWEEN THE VALUE DETERMIN ED BY THE DVO AND THE PURCHASE PRICE OF LAND MENTIONED IN THE REGIS TERED SALE DEED. (RS.33,30,000/- - RS.12,50,000/-) AS UNEXPLAINED INVES TMENT U/S. 69 OF THE ACT. PENALTY PROCEEDINGS U/S. 271(1)(C) WERE INITIATED AGAINST THE ASSESSEE. THE ASSESSING OFFICER VIDE ORDER DA TED 28-12- 2010 LEVIED PENALTY OF RS.7,00,130/-. THE ASSESSEE PREFERRE D AN APPEAL AGAINST THE ORDER LEVYING PENALTY U/S. 271(1)(C). THE COMMISS IONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER CONFIRMED THE LEVY OF PENALTY AND DISMISSED THE APPEAL OF THE ASSESSEE. NOW, THE ASSES SEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF C OMMISSIONER OF INCOME TAX (APPEALS). 3. SHRI NIKHIL PATHAK APPEARING ON BEHALF OF THE ASSESSEE S UBMITTED THAT THE ASSESSING OFFICER HAS MADE ADDITION ON PRESUMPTI ON THAT THE 3 ITA NO. 1399/PN/2012, A.Y. 2007-08 ASSESSEE HAS PAID PART OF SALE CONSIDERATION IN CASH AND THUS MADE ADDITION OF RS.20,80,000/-. THE APPEAL OF THE ASSESSEE IN Q UANTUM PROCEEDINGS WAS DISMISSED BY THE COMMISSIONER OF INCOME T AX (APPEALS). IN SECOND APPEAL, THE TRIBUNAL ALSO CONFIRMED THE ADDITION. THE ASSESSEE THEREAFTER, ACCEPTED THE ADDITION. HOWEVER , THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE ASSESSEE HAS PAID CASH TOWARDS PART PAYMENT OF SALE CONSIDERATION. THE QUANTUM ADDITION HAS BEEN SUSTAINED MERELY ON THE THEORY OF PROBABILITY. HOWEVER, PENALTY CANNOT BE LEVIED ON THE ADDITIONS MADE ON PROBABILITY, ASSUMPTIONS AND ESTIMATIONS. THE LD. AR FURTHER CONTENDED THAT ONE OF THE REASONS FOR MAKING ADDITION WAS THAT SHRI DHEMSE FROM WHOM THE ASSESSEE HA D PURCHASED THE LAND HAD ADMITTED THE RECEIPT OF RS.25,28,000/- IN CAS H FROM THE ASSESSEE. HOWEVER, NO OPPORTUNITY WAS GIVEN TO THE ASS ESSEE TO CROSS- EXAMINE SHRI DHEMSE. WITHOUT AFFORDING OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE SHRI DEHEMSE, PENALTY U/S. 271(1)(C) CANNOT BE LEVIED. THE LD. AR FURTHER SUBMITTED THAT IN QUANTUM PROCEEDINGS THE ADDITION HAS BEEN MADE ON THE DIFFERENCE BETWEEN THE DVO S VALUATION REPORT AND THE SALE PRICE QUOTED BY THE ASSESSEE, WHE REAS, IF THE CONTENTIONS OF THE REVENUE ARE TO BE ACCEPTED, THE ADDITION SHOULD HAVE BEEN OF RS.25,28,000/- I.E. THE AMOUNT ALLEGEDLY RECEIVED IN CASH BY SHRI DHEMSE. THE LD. AR WHILE CONCLUDING HIS ARGUMENT SUBM ITTED THAT PENALTY AND QUANTUM PROCEEDINGS ARE INDEPENDENT. WHILE DECIDING PENALTY CONCLUSIVE INFERENCE CANNOT BE DRAWN FROM THE ASSESSMENT PROCEEDINGS. IN SUPPORT OF HIS ARGUMENT, THE LD. AR PLACED RELIANCE ON THE FOLLOWING CASE LAWS: 4 ITA NO. 1399/PN/2012, A.Y. 2007-08 I. CIT, VS. KHODAY ESWARSA AND SONS, 83 ITR 369 (SC); II. SHREE NIRMAL COMMERCIAL LIMITED. VS. CIT, 308 ITR 406 (BOM); III. NATIONAL TEXTILES. VS. CIT, 249 ITR 125 (GUJ); IV. SATHE BISCUITS VS. DCIT, 148 TTJ 10 (PUNE). 4. ON THE OTHER HAND SHRI HITENDRA NINAVE REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF THE C OMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE LEVY OF PENALTY. THE LD. DR SUBMITTED THAT THE ASSESSEE HAD PAID A SUM OF RS.25,28,00 0/- AS ON-MONEY TO SHRI DHEMSE. THE VENDOR HAD DEPOSITED T HE SAID AMOUNT IN HIS BANK AND HAS DISCLOSED THE SAME IN HIS RETURN OF INC OME. IT IS A WELL KNOWN FACT THAT WHERE ON-MONEY IS PAID, NO TRANSACTIO NS ARE RECORDED IN THE BOOKS OF ACCOUNT, THUS, LEAVING NO TRIAL OF EVIDENCE. THE LD. DR PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE. 5. BOTH SIDES HEARD, ORDERS OF THE AUTHORITIES BELOW PERU SED. ADDITION U/S. 69 OF THE ACT HAS BEEN MADE IN THE INCOME R ETURNED BY THE ASSESSEE ON THE BASIS OF VALUATION REPORT OF DVO AND THE ADMISSION OF THE VENDOR THAT HE HAS ACCEPTED RS.25,28,000/- IN CAS H FROM THE ASSESSEE. ACCORDING TO THE REGISTERED SALE DEED, THE CO NSIDERATION FOR PURCHASE OF LAND IS RS.12,50,000/-. THE DVO IN HIS REPORT HAS DETERMINED THE VALUE OF LAND AS RS.33,30,000/-. IN THE AS SESSMENT ORDER, THE ASSESSING OFFICER HAS GIVEN A FINDING THAT THE AS SESSEE HAS PAID RS.12,50,000/- THROUGH CHEQUE AND RS.25,28,000/- IN C ASH AS CONSIDERATION FOR PURCHASE OF LAND. THUS, THE TOTAL CONSID ERATION ALLEGEDLY PAID BY THE ASSESSEE FOR PURCHASE OF LAND IS RS.3 7,78,000/-. HOWEVER, THE ADDITION HAS BEEN MADE ONLY TO THE EXTENT OF DIFFERENCE BETWEEN THE VALUE DETERMINED BY THE DVO AND THE PURCH ASE PRICE 5 ITA NO. 1399/PN/2012, A.Y. 2007-08 MENTIONED IN THE REGISTERED SALE DEED. IT WOULD BE PERTIN ENT TO MENTION HERE THAT THE ASSESSEE HAS ALSO OBTAINED VALUATION REPO RT FROM THE GOVERNMENT APPROVED VALUER. HE HAS DETERMINED THE VALUE OF LAND IN QUESTION AT RS.12,21,000/- @ 11,00,000/- PER HECTARE. 6. WE FIND FORCE IN THE ARGUMENT OF THE LD. AR THAT THE AD DITION HAS BEEN MADE ONLY ON THE BASIS OF PROBABILITY. THE REVENUE AUTHORITIES HAVE ASSUMED THE PAYMENT OF ON-MONEY AFTER DRAWING INFE RENCE FROM THE CASH DEPOSITS OF RS.25,28,000/- IN THE BANK ACCOUNT O F THE VENDOR. THERE CAN BE A STRONG PRESUMPTION THAT THE AMOUNT DE POSITED IN THE BANK ACCOUNT OF SHRI DHEMSE IS THE PART OF CONSIDERATION PAID BY THE ASSESSEE IN CASH FOR PURCHASE OF LAND. HOWEVER, THE REVE NUE HAS NOT BEEN ABLE TO DRAW NEXUS BETWEEN THE AMOUNT DEPOSITED IN THE BANK ACCOUNT OF THE VENDOR AND THE PAYMENT MADE BY THE AS SESSEE EXCEPT THE STATEMENT OF SHRI DHEMSE. IT IS A WELL SETTLED LAW TH AT ADDITION CAN BE MADE ON THE THEORY OF PROBABILITY. HOWEVER, PENALTY C ANNOT BE LEVIED ON THE ADDITION MADE ON SUCH THEORIES, HOWEVER, ST RONG IT MAY BE. ANOTHER REASON FOR LEVY OF PENALTY IS ADMISSION OF SHRI DHE MSE. THE ASSESSEE WAS NOT AFFORDED OPPORTUNITY TO CROSS-EXA MINE SHRI DHEMSE. THE ASSESSING OFFICER AUTHORITIES BELOW HAVE VIOLAT ED THE PRINCIPLES OF NATURAL JUSTICE IN NOT GIVING OPPORTUNITY TO T HE ASSESSEE TO CROSS-EXAMINE SHRI DHEMSE. PENALTY CANNOT BE LEVIED ON A SSESSEE SOLELY ON THE ADMISSION OF VENDOR WITHOUT ANY CORROBORATIVE EVIDE NCE. 7. THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. RATANLAL SUREKHA REPORTED AS 61 TAXMAN 133 (CAL.), WHILE UPHOLDING T HE ORDER 6 ITA NO. 1399/PN/2012, A.Y. 2007-08 OF TRIBUNAL IN DELETING THE PENALTY U/S. 271(1)(C) WHERE OPPOR TUNITY WAS NOT AFFORDED TO THE ASSESSEE TO CROSS-EXAMINE THE PERS ON ON WHOSE CONFESSION PENALTY WAS LEVIED, THE HON'BLE HIGH COURT HELD: 6. WE HAVE ALREADY STATED THE FACTS AND CIRCUMSTAN CES OF THIS CASE AS APPEARING FROM THE ORDER OF THE TRIBUNAL. THE TRIBU NAL HAS FOUND THAT THE DEPARTMENT HAS NOT PROVED BY ANY COGENT EVIDENCE TH AT THE AMOUNT CREDITED AS LOAN TAKEN FROM RAJ KUMAR JAIN & CO. WA S THE INCOME OF THE ASSESSEE AND THAT THE ASSESSEE FAILED TO DISCLOSE T HAT INCOME IN HIS RETURN. THE TRIBUNAL, ON THE FACTS, CAME TO THE FIN DING THAT THERE WAS NO CASE FOR LEVYING PENALTY. THAT APART, THE ORDER OF PENALTY IS VITIATED BECAUSE OF NON-COMPLIANCE OF THE PRINCIPLES OF NATU RAL JUSTICE. THE ASSESSEE WAS NOT AFFORDED ANY OPPORTUNITY TO CROSS- EXAMINE THE PARTNER WHOSE CONFESSION WAS SOUGHT TO BE USED AGAINST HIM. ACCORDINGLY, THE CONFESSION ON THE BASIS WHEREOF PENALTY WAS LEVIED OUGHT NOT TO HAVE BEEN RELIED ON BY THE IAC. THIS HAS VITIATED THE PE NALTY PROCEEDING . IN OUR VIEW, ON THE FACTS OF THIS CASE, THE TRIBUNAL H AS COME TO A CORRECT CONCLUSION. 8. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHREE NI RMAL COMMERCIAL LIMITED. VS. CIT (SUPRA) DELETED THE PENALTY LEVIED U/S. 271(1)(C) ON THE GROUND THAT THE ASSESSEE WAS NOT GIVEN OPPORTUNITY TO CONFRONT THE DEPOSITORS BY WAY OF CROSS-EXAMINATION. THE RELEVANT EXTRACT OF THE FINDINGS OF THE HON'BLE HIGH COURT ARE AS UNDER: 11. ............................THE ASSESSEE HAS T HROUGHOUT TAKEN A CONSISTENT STAND THAT THE CONTENTION OF THE TAX AUTHORITIES TH AT THE PERSON/S WHO HAD GIVEN THE LOANS TO THE ASSESSEE HAD MADE A STAT EMENT THAT THEY HAVE IN FACT NOT GIVEN ANY LOAN IS INCORRECT AND WA S MADE BEFORE SOME OTHER INCOME-TAX OFFICER IN SOME OTHER PROCEEDINGS THE ASSESSEE HAS CONSISTENTLY CONTENDED THAT THE ALLEGED STATEMENTS WERE MADE BEHIND THE BACK OF THE ASSESSEE AND THE ASSESSEE WAS NEVER GIVEN ANY OPPORTUNITY TO CONFRONT THEM AND/OR CROSS-EXAMINE T HEM. NO PARTICULARS OF ANY SUCH STATEMENT/S ARE ON RECORD. IN ANY EVENT , THE SAID ORIGINAL ASSESSMENT WAS SET ASIDE AND THE INCOME-TAX AUTHORI TIES THEMSELVES AT THE TIME OF REASSESSMENT OF THE ASSESSEE'S INCOME P ERTAINING TO THE ASSESSMENT YEAR 1967-68 AND THE ASSESSMENT YEAR 196 8-69 ONCE AGAIN TRIED TO SUMMON THE PARTIES WHO HAD GIVEN LOANS TO THE ASSESSEE. THE ASSESSING AUTHORITY SURELY DID NOT EXPECT ALL THE P ARTIES TO COME FORWARD WITH RECORDS WHICH BY THAT TIME WERE ABOUT 15/16 YE ARS OLD. DESPITE THAT FOUR OF THE PARTIES WHO HAD GIVEN LOANS TO THE ASSESSEE IN THE ASSESSMENT YEAR 1966-67 AND WHOSE LOANS WERE TREATE D AS BOGUS LOANS IN THE ORIGINAL ASSESSMENT CAME FORWARD WITH THE DO CUMENTS AND SATISFIED THE TAXING AUTHORITIES ABOUT THE GENUINEN ESS OF THE LOANS GIVEN BY THEM TO THE ASSESSEE. EVEN FOR THE ASSESSMENT YE AR 1967-68 ONLY TWO 7 ITA NO. 1399/PN/2012, A.Y. 2007-08 PARTIES WHO HAD GIVEN LOANS TO THE ASSESSEE AGGREGA TING TO RS. 75,000 WERE DISBELIEVED ON THE GROUND THAT THEY WERE NOT P RODUCED BEFORE THE TAX AUTHORITIES. THE PENALTY PROCEEDINGS WERE ADMIT TEDLY INITIATED IN THE YEAR 1985. WE ARE, THEREFORE, OF THE VIEW THAT NO P ENALTY COULD HAVE BEEN LEVIED ON THE ASSESSEE PERTAINING TO THE ASSES SMENT YEAR 1966-67 AND THE ASSESSMENT YEAR 1967-68 ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE THE DEPOSITORS AFTER A LAPSE OF 17 YEAR S FROM THE DATE OF THE LOAN RECEIVED FROM THE PARTIES BY THE ASSESSEE. THE TRIBUNAL WAS ALSO WRONG IN CONFIRMING THE PENALTY LEVIED BY THE INCOM E-TAX OFFICER IN THE YEAR 1985, RELYING UPON THE PURPORTED STATEMENTS MA DE BY THE DEPOSITORS IN SOME OTHER PROCEEDINGS BEFORE SOME OT HER OFFICERS SOME TIME IN THE YEAR 1971-72 WHEN ADMITTEDLY THE ASSESS EE WAS NOT GIVEN ANY OPPORTUNITY TO CONFRONT THE SAID DEPOSITORS BY WAY OF CROSS- EXAMINATION. FOR THE AFORESAID REASONS, ALL THE FOUR QUESTIONS RAISED BY THE TRIBUNAL IN THE PRESENT REFERENCE FOR THE ASSESSMEN T YEAR 1966-67 AND THE ASSESSMENT YEAR 1967-68 AND ONE QUESTION FOR TH E ASSESSMENT YEAR 1967-68 ARE ANSWERED IN THE NEGATIVE, I.E., IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. AS SET OUT IN OUR ORDER DATED JULY 31, 2008, DESPITE REPEATED OPPORTUNITIES GIVEN TO THE REVENUE NO ONE HAS APPEARED ON BEHALF OF THE REVENUE. WE HAVE, THEREFORE, PROCEEDE D TO PASS THE PRESENT ORDER AFTER HEARING THE ADVOCATE REPRESENTING THE A SSESSEE. IN ANY EVENT WE DO NOT PASS ANY ORDER AS TO COSTS. 9. IN THE CASE OF BRITANNIA INDUSTRIES LIMITED VS. DEPUTY COMMISSIONER OF INCOME TAX REPORTED AS 238 ITR 57 (CAL.). THE HON'BLE CALCUTTA HIGH COURT HAS HELD THAT IT CANNOT BE SAID THAT THERE WAS ESCAPEMENT OF INCOME IN A CASE WHERE THE DVO HAS E NHANCED THE VALUATION OF PROPERTY. THE DVOS REPORT IS MERELY AN EX PRESSION OF OPINION. THUS, ON THE BASIS OF OPINION AND ASSUMPTION NO PE NALTY U/S. 271(1)(C) IS LEVIABLE. OFFENCE OF CONCEALMENT IS NOT PROVED IN SU CH SITUATION WHICH IS THE CO-REQUIREMENT FOR LEVY OF PENALTY U /S. 271(1)(C) OF THE ACT. SIMILARLY, IN THE CASE OF SATHE BISCUITS VS. DCI T (SUPRA) THE CO-ORDINATE BENCH HAS HELD THAT NO PENALTY CAN BE LEVIED ON THE ADDITION MADE ON THE BASIS OF DVOS REPORT. 10. THUS, IN VIEW OF THE FACTS OF THE CASE AND WELL SETTLED LA W, WE ARE OF THE CONSIDERED VIEW THAT NO PENALTY IS LEVIABLE U/S. 271(1 )(C) IN THE 8 ITA NO. 1399/PN/2012, A.Y. 2007-08 PRESENT CASE. THEREFORE, THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 30 TH DAY OF OCTOBER, 2015. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 30 TH OCTOBER, 2015 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-II, NASHIK 4. ' / THE CIT-II, NASHIK 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE