ITO, Ward - 36(1), Kolkata, Kolkata V. Shri Raghunandan Mody, Kolkata

ITA 1439/KOL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6373 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 15-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (D), KOLKATA [BEFORE SHRI P.M. JAGTAP, AM & SHRI A.T. VARKEY, JM] I.T.A. NO. 1439/KOL/2017 ASSESSMENT YEAR: 2011-12 INCOME TAX OFFICER..........................................................................APPELLANT WARD 36(1), KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, E.M. BY PASS, KOLKATA 700 107. SHRI RAGHUNANDAN MODY.........................RESPONDENT RASOI COURT, 20, R.N. MUKHERJEE ROAD, BURDWAN 700 001 [PAN: AEXPM 8474 P] APPEARANCES BY: SHRI G.H. SEEMA, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. SHRI S.M. SURANA APPEARING ON BEHALF OF THE ASSESSEE DATE OF CONCLUDING THE HEARING : MAY 31, 2018 DATE OF PRONOUNCING THE ORDER : JUNE 08, 2018 ORDER PER P.M. JAGTAP, AM THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 10, KOLKATA DATED 09.03.2017 WHEREBY HE CANCELLED THE PENALTY OF RS. 11,38,202/- IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE ACT. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS. 4,92,990/-. IN THE ASSESSMENT COMPLETED U/S 143(3)/147 VIDE AN ORDER DATED 17.03.2014, THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE A.O. AT RS. 1,43,00,126/- AFTER MAKING THE FOLLOWING TWO ADDITIONS: 2 I.T.A. NO. 1439/KOL/2017 ASSESSMENT YEAR: 2011-12 SHRI RAGHUNANDAN MODY 1. ADDITION MADE ON ACCOUNT OF RENT FREE ACCOMMODATION RS. 96,00,000/- 2. ADDITION MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE INCURRED THROUGH CREDIT CARD RS. 42,07,136/ 3. AGAINST THE ORDER PASSED BY THE AO UNDER SECTION 143(3)/147, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) SUSTAINED THE ADDITION MADE BY AO ON ACCOUNT RENT FREE ACCOMMODATION AND UNEXPLAINED EXPENDITURE INCURRED THROUGH CREDIT CARD TO THE EXTENT OF RS. 14,00,000/- AND RS. 22,83,498/- RESPECTIVELY. THEREAFTER PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) WERE INITIATED BY THE A.O. AND SINCE THE EXPLANATION OFFERED BY THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED DURING THE COURSE OF THE SAID PROCEEDINGS WAS NOT FOUND ACCEPTABLE BY HIM, THE A.O. IMPOSED A PENALTY OF RS. 11,38,202/- U/S 271(1)(C). 4. THE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) CANCELLED THE SAID PENALTY IMPOSED BY THE A.O. UNDER SECTION 271(1)(C) FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO 18 OF HIS IMPUGNED ORDER: FROM THE FINDINGS ABOVE, IT IS SEEN THAT A PORTION OF THE IMPUGNED ADDITIONS WERE CONFIRMED BY THE 1ST APPELLATE AUTHORITY AFTER SEEKING A REMAND REPORT FROM THE APPELLANT, AND THE ADDITIONS WERE CONFIRMED ONLY TO THE EXTENT THAT THE APPELLANT- INDIVIDUAL WAS UNABLE TO SUBMIT EVIDENCE IN FULL REGARDING THE IMPUGNED EXPENSES. THE 1ST APPELLATE AUTHORITY HAS ALSO OBSERVED THAT AS THE PAYMENT WAS MADE BY THE RELEVANT COMPANIES, 3 I.T.A. NO. 1439/KOL/2017 ASSESSMENT YEAR: 2011-12 SHRI RAGHUNANDAN MODY THEREFORE, QUESTION OF UNEXPLAINED EXPENDITURE DOES NOT ARISE. ON THE OTHER HAND, I FIND THAT THERE IS FACTUAL MERIT IN THE CONTENTIONS OF THE APPELLANT THAT ALL THE CREDIT CARD PAYMENTS WERE MADE BY COMPANIES WHOSE CHAIRMAN THE APPELLANT WAS, AND THAT THESE WERE THROUGH BANKING CHANNELS AND NOT BY CASH. I ALSO FIND THAT THE LD. AO HAS NOT BROUGHT FORTH ANY MATERIAL TO SUGGEST THAT ANY OF THE SUBJECT CREDIT CARD PAYMENTS WERE MADE DIRECTLY BY THE APPELLANT HIMSELF OUT OF ANY UNDISCLOSED SOURCE OF INCOME AND NOT BY THE COMPANIES WHOSE CHAIRMAN THE APPELLANT WAS. I FIND THAT THE MATTER HAS BEEN DECIDED AGAINST THE APPELLANT IN APPEAL, ONLY FOR THE SOLE REASON THAT THE APPELLANT WAS UNABLE TO PRODUCE NECESSARY EVIDENCE BY WAY OF DEBIT VOUCHERS OF CONCERNED COMPANIES, AND HE PRODUCED ONLY SOME SAMPLE BILLS WHICH WERE ACCEPTABLE TO THE LD. AO AND THE LD. CIT(A), BUT TO THAT EXTENT ONLY. THEREFORE, I FIND THAT THE MATTER WAS FIT ENOUGH FOR CONFIRMATION OF THE IMPUGNED ADDITION. THIS DOES NOT MEAN THAT THERE WOULD BE AUTOMATIC IMPOSITION OF THE PENALTY. IT IS TO BE OBSERVED THAT IN CASE OF THIS ADDITION ALSO NO FALSITY, WRONGFULNESS, ERROR OR SUPPRESSION IN THE SUBMISSION OR DOCUMENTS PRODUCED WAS FOUND. HENCE, THERE IS NO CASE OF 'FURNISHING OF INACCURATE PARTICULARS IN TERMS OF SECTION 271(1)(C) AS ALLEGED BY LD. A/O AS PRESUMPTION OF EXPLANATION - 1OF SECTION 271(1)(C) IS NOT APPLICABLE IN RESPECT OF ALLEGATION OF 'FURNISHING OF INACCURATE PARTICULARS' AS THE SAME IS AVAILABLE IN RESPECT OF ALLEGATION OF 'CONCEALMENT' ONLY. ACCORDINGLY, I AM INCLINED TO ACCEPT THE CONTENTION OF THE APPELLANT THAT THE PENALTY U/S 27L(L)(C) CANNOT BE LEVIED IN RESPECT OF CREDIT CARD ADDITION ALSO IN ABSENCE OF ANY FINDING OF FALSEHOOD, SUPPRESSION OR ERROR IN APPELLANT'S SUBMISSION OR DOCUMENTS PRODUCED BY HIM. THERE IS ALSO MERIT IN THE CONTENTION OF THE APPELLANT THAT THE DEEMING PROVISION FOR ADDITION U/S 69C IS AVAILABLE TO THE LD.AO UPTO ASSESSMENT STAGE ONLY, AND SAID DEEMING FICTION CANNOT BE EXTENDED FOR APPLYING TO PENALTY PROCEEDINGS ALSO. FOR LEVY OF PENALTY FOR ADDITIONS U/S 69C, DEPARTMENT IS REQUIRED TO PROVE BEYOND DOUBT THAT ALLEGED CREDIT CARD PAYMENTS REPRESENT INCOME OF THE ASSESSEE AND IN ABSENCE OF THAT, PENALTY U/S 271(1)(C) CANNOT BE LEVIED FOR ADDITION MADE U/S 69C MORE PARTICULARLY FOR ALLEGED 'FURNISHING OF INACCURATE PARTICULARS' AS IN PENALTY PROCEEDINGS, BENEFIT OF DOUBT IS ALWAYS IN FAVOUR OF THE ASSESSEE. I HAVE CAREFULLY PERUSED THE DECISIONS RELIED UPON BY THE APPELLANT, WHICH HAVE ALSO BEEN DISCUSSED IN THIS APPELLATE ORDER IN THE EARLIER PARAGRAPHS. IT IS ALSO QUITE TRUE THAT THE 1 ST APPELLATE AUTHORITY HAS DIRECTED THAT 10% OF THE BALANCE EXPENSES BE CONFIRMED AS TO BE PERSONAL IN NATURE, AND THAT THIS WAS ON THE BASIS OF ESTIMATE. THEREFORE, THESES WERE GOOD ENOUGH FOR PART-CONFIRMATION OF THE QUANTUM ADDITIONS, BUT IN MY CONSIDERED VIEW ARE NOT QUITE SUFFICIENT TO ATTRACT A PENALTY FOR CONCEALMENT OR FOR 4 I.T.A. NO. 1439/KOL/2017 ASSESSMENT YEAR: 2011-12 SHRI RAGHUNANDAN MODY SUBMISSION OF FOR INACCURATE PARTICULARS OF INCOME. IN MY CONSIDERED VIEW OF THE FACTS AND CIRCUMSTANCES, THE IMPUGNED PENALTY U/S 271(1)(C) WOULD NOT BE SUSTAINABLE FOR THE CONFIRMATION OF THE QUANTUM ADDITION OF RS. 22,83,498/- DURING THE QUANTUM PROCEEDINGS. THE SAME REQUIRES TO BE DELETED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUPPORTED THE IMPUGNED ORDER OF THE LD. CIT(A) CANCELLING THE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) BY RAISING THE PRELIMINARY ISSUE THAT THE NOTICE ISSUED BY THE A.O. INITIATING THE PENALTY PROCEEDINGS BEING DEFECTIVE, THE PENALTY IMPOSED U/S 271(1)(C) IN PURSUANCE THEREOF IS NOT SUSTAINABLE. HE HAS PLACED ON RECORD A COPY OF THE SAID NOTICE ISSUED BY THE A.O. AND POINTED OUT THAT THE IRRELEVANT PORTION OF THE SAID NOTICE HAVING NOT BEEN STRUCK OFF BY THE A.O., THE EXACT CHARGE AGAINST THE ASSESSEE AS TO WHETHER HE CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME WAS NOT CLEAR. IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE LATEST DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JEETMAL CHORARIA VS ACIT RENDERED VIDE ITS ORDER DATED 01.12.2017 PASSED IN ITA NO. 956/KOL/2016 WHEREIN A SIMILAR ISSUE IS DECIDED BY THE TRIBUNAL AFTER TAKING INTO CONSIDERATION THE RELEVANT DECISION OF THE DIFFERENT HIGH COURTS VIDE PARAGRAPH NO. 14 AND 15 OF ITS ORDER WHICH READ AS UNDER: 5 I.T.A. NO. 1439/KOL/2017 ASSESSMENT YEAR: 2011-12 SHRI RAGHUNANDAN MODY FROM THE AFORESAID DISCUSSION IT CAN BE SEEN THAT THE LINE OF REASONING OF THE HONBLE BOMBAY HIGH COURT AND THE HONBLE PATNA HIGH COURT IS THAT ISSUANCE OF NOTICE IS AN ADMINISTRATIVE DEVICE FOR INFORMING THE ASSESSEE ABOUT THE PROPOSAL TO LEVY PENALTY IN ORDER TO ENABLE HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DONE. MERE MISTAKE IN THE LANGUAGE USED OR MERE NON-STRIKING OF THE INACCURATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE. THE TRIBUNAL BENCHES AT MUMBAI AND PATNA BEING SUBORDINATE TO THE HONBLE BOMBAY HIGH COURT AND PATNA HIGH COURT ARE BOUND TO FOLLOW THE AFORESAID VIEW. THE TRIBUNAL BENCHES AT BANGALORE HAVE TO FOLLOW THE DECISION OF THE HONBLE KARNATAKA HIGH COURT. AS FAR AS BENCHES OF TRIBUNAL IN OTHER JURISDICTIONS ARE CONCERNED, THERE ARE TWO VIEWS ON THE ISSUE, ONE IN FAVOUR OF THE ASSESSEE RENDERED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING (SUPRA) AND OTHER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. KAUSHALYA. IT IS SETTLED LEGAL POSITION THAT WHERE TWO VIEWS ARE AVAILABLE ON AN ISSUE, THE VIEW FAVOURABLE TO THE ASSESSEE HAS TO BE FOLLOWED. WE, THEREFORE, PREFER TO FOLLOW THE VIEW EXPRESSED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING (SUPRA). WE HAVE ALREADY OBSERVED THAT THE SHOW CAUSE NOTICE ISSUED IN THE PRESENT CASE U/S 274 OF THE ACT DOES NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT IS FOR CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE SHOW CAUSE NOTICE U/S 274 OF THE ACT DOES NOT STRIKE OUT THE INAPPROPRIATE WORDS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IMPOSITION OF PENALTY CANNOT BE SUSTAINED. THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE WHICH IS BASED ON THE DECISIONS REFERRED TO IN THE EARLIER PART OF THIS ORDER HAS TO BE ACCEPTED. WE, THEREFORE, HOLD THAT IMPOSITION OF PENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE CANCELLED. 6. IN OUR OPINION, THE DECISION RENDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JEETMAL CHORARIA VS ACIT (SUPRA) IS SQUARELY APPLICABLE IN THE PRESENT CASE AND EVEN THE LEARNED DR HAS NOT DISPUTED THIS POSITION. WE, THEREFORE, RESPECTFULLY FOLLOW THE SAID DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL AND CANCEL THE PENALTY IMPOSED BY THE A.O. UNDER SECTION 271(1)(C) AND CONFIRMED BY THE LD. CIT(A). 6 I.T.A. NO. 1439/KOL/2017 ASSESSMENT YEAR: 2011-12 SHRI RAGHUNANDAN MODY 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JUNE, 2018. SD/- SD/- (A.T. VARKEY) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08/06/2018 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. SHRI RAGHUNANDAN MODY, RASOI COURT, 20, R.N. MUKHERJEE ROAD, KOLKATA 700 001. 2. ITO, WARD 36(1), ROOM NO. 810, AAYAKAR BHAWAN POORVA, 110, SHANTIPALLY, E.M. BY PASS, KOLKATA 700 107. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA