Sri. Chicoo Joseph, Cochin V. The ITO, Cochin

ITA 144/COCH/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7704 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 23-08-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 30-03-2016
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Keywords: Initiation of penalty proceedings
• Section: 68

Judgement Text

ITA NO.144/COCH/2016 1 , IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN . . , ., ! ! ! ! BEFORE S/SHRI B. P. JAIN, AM & GEORGE GEORGE K., JM ' ' ' ' ./ I.TA NO.144/COCH/2016 ( #$ % /ASSESSMENT YEAR : 2006-07) CHICOO JOSEPH, ROSE VILLA, ALAPATT CROSS ROAD, RAVIPURAM, KOCHI-682 015. VS THE INCOME TAX OFFICER, WARD-2(2), KOCHI. ( &' &' &' &' /ASSESSEE APPELLANT) ( ( (( ( ) ) ) ) &' &'&' &' /REVENUE -RESPONDENT) & . . ' ./PAN NO. AEPPJ 4173C &' * + /ASSESSEE BY SHRI MATHEW JOSEPH, CA ( ) &' * + /REVENUE BY SHRI A. DHANARAJ, SR. DR ,- * ./ / DATE OF HEARING 23/08/2016 0 % * ./ /DATE OF PRONOUNCEMENT 06/09/2016 1 1 1 1 /ORDER PER B.P. JAIN, AM: THIS APPEAL OF THE ASSESSEE ARISES FROM THE OR DER OF THE LD. CIT(A)-II, KOCHI DATED 18/12/2015 FOR THE ASSESSMENT YEAR 2006-07. ITA NO.144/COCH/2016 2 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE COMMISSIONER OF INCOME TAX(APPEALS) HAS NOT CONSIDERED THE FACT THAT THE CASH DEPOSIT WAS MADE BY THE ASSESSEE S FATHER AND THERE WAS NO CONCEALMENT AND ALL THE FACTS WERE DISCLOSED BEFORE THE ASSESSING OFFICER. THE FACT THAT THE ASSESSEE HAD N O KNOWLEDGE OR INTENTION ABOUT THE DEPOSIT WAS ALSO IGNORED BY THE OFFICER. 2. ANY OTHER GROUNDS THAT MAY BE ALLOWED AT THE TI ME OF HEARING. 3. THE ASSESSEE HAS ALSO FILED AN ADDITIONAL GROU ND OF APPEAL WHICH IS REPRODUCED HEREINBELOW:- THE LEVY OF PENALTY WAS WITHOUT CONSIDERING THE FA CT THAT PENALTY PROCEEDINGS U/S. 271(1)(C) WAS NOT INITIATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 31.12.2008 AND HENCE THE LEV Y OF PENALTY IS AGAINST LAW AND FACTS. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE WAS A PARTNER IN THE FIRM M/S. BIG BOSS IN THE AY 2006-07. THE RETURN OF INCOME W AS FILED ON 31.10.2006 DECLARING A TOTAL INCOME OF RS.1,27,520/-. THE CAS E OF THE ASSESSEE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S. 143(2) OF T HE ACT AND THE ASSESSMENT WAS MADE ON 31/12/2008 BY MAKING AN ADDITION OF RS.23,5 0,000/- AS CASH CREDITS U/S. 68 OF THE ACT. ITA NO.144/COCH/2016 3 5. THE ASSESSEE WAS THEREAFTER ISSUED NOTICE U/S. 274 R.W.S. 271(1)(C) OF THE ACT FOR INITIATION OF PENALTY PROCEEDINGS FOR A.Y. 2006 -07. THE ORDER OF PENALTY WAS PASSED ON 30/03/2012 BY INVOKING EXPLANATION 1 TO S ECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS DISBELIEVED DURING THE QUANTUM PROCEEDINGS FOR THE REASON THAT THERE WERE NO DOCUMENTARY EVIDENCE TO SUPPORT THE CLAIM OF THE AS SESSEE THAT THE CASH CREDIT WAS EXPLAINED BY THE BALANCE OF RS.50,00,000 /- AVAILABLE WITH THE ASSESSEES FATHER IN F.Y. 1998-99. IT WAS HELD BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD OFFERED THE EXPLANATION WHICH HE WAS N OT ABLE TO SUBSTANTIATE AND THE SAME REPRESENTS THE PARTICULARS OF INCOME W HICH HAD BEEN CONCEALED. 6. AGGRIEVED BY THE ORDER DATED 30/03/2012 LEVYI NG PENALTY, THE ASSESSEE CHALLENGED THE SAME BEFORE THE LD. CIT(A). THE APPE AL OF THE ASSESSEE WAS DISMISSED VIDE THE IMPUGNED ORDER DATED 18/12/2015. THE LD. CIT(A) OPINED THAT THE ADDITION HAS BEEN CONFIRMED BY ITAT AND TH E FACTS RELATING TO UNDISCLOSED INCOME OF THE ASSESSEE STOOD ESTABLISHE D. THE CONTENTION OF THE ASSESSEE THAT HE WAS A STUDENT DURING THE YEAR AND HIS FATHER WAS IN THE MANAGEMENT OF BUSINESS WAS REJECTED BY THE LD. CIT( A). 7. IN THE ADDITIONAL GROUND OF APPEAL, THE ASSESS EE HAS CHALLENGED THE INITIATION OF PROCEEDINGS U/S. 271(1)(C), IN VIEW O F THE FACT THAT THERE WAS NO DIRECTION IN THE ASSESSMENT ORDER DATED 31/12/2008 FOR INITIATION OF PENALTY U/S. ITA NO.144/COCH/2016 4 271(1)(C) OF THE ACT. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THE QUESTION RAISED IS A PURE LEGAL QUESTION WHICH CAN BE DISPOS ED OF ON THE AVAILABLE FACTS ON RECORD AS HELD BY THE JUDGMENT OF THE HONBLE SU PREME COURT IN THE CASE OF NTPC LTD. VS. CIT 229 ITR 383 (SC). THE LD. COUNSE L FOR THE ASSESSEE CONTENDED THAT THE ASSESSMENT ORDER DOES NOT CONTAIN ANY DIRE CTION WHATSOEVER TO INITIATE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT AND I S THEREFORE VIOLATIVE OF SECTION 271(1B) AND SECTION 271(1)(C) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE JUDGMENT OF HONBLE KARNAT AKA HIGH COURT IN THE CASE OF CIT VS. MWP LTD., 97 DTR 395 TO SUPPORT HIS CONT ENTION. 8. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS PASSED BY THE ASSESSING OFFICER AND THE LD. CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. THE PROVISIONS OF SECTION 271(1)(B) OF THE ACT ARE REPR ODUCED HEREINBELOW:- 271(1)(B) WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSES SMENT OR REASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTION FOR INITIAT ION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB-SECTION(1); SUCH AN ORDER O F ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFAC TION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS U NDER THE SAID CLAUSE (C). 10. A BARE PERUSAL OF THE ASSESSMENT ORDER WOULD S HOW THAT THERE IS NO DIRECTION IN THE ASSESSMENT ORDER DATED 31/12/2008 TO INITIAT E PENALTY U/S. 271(1)(C) OF THE ITA NO.144/COCH/2016 5 ACT. SECTION 271(1)(B) OF THE ACT STIPULATES THAT A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS SHALL BE DEEMED TO CONSTITUTE S ATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. HOWEVER, IN THE PRESENT CASE, THERE IS NO DIRECTION FOR INIT IATION OF PENALTY PROCEEDINGS AND THE DEEMING FICTION U/S. 271(1)(B) CANNOT BE AP PLIED. THE ONLY CONCLUSION THAT CAN BE ARRIVED AT, IS THAT, THE ASSESSING OFFI CER WAS NOT SATISFIED AT THE TIME OF FRAMING THE ASSESSMENT ORDER THAT THE ASSESSEE H AD CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF I NCOME SO AS TO WARRANT INITIATION OF PENALTY U/S. 271(1)(C) OF THE ACT. 11. THE ISSUE OF DIRECTION IN THE ASSESSMENT ORDER FOR INITIATION OF PENALTY PROCEEDINGS FELL FOR CONSIDERATION BEFORE THE HONB LE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING F ACTORY IN I.T.A NO. 2564 OF 2005, WHEREIN IT WAS HELD HAS UNDER:- 50. A READING OF SECTION CLEARLY INDICATES THAT TH E ASSESSMENT ORDER SHOULD CONTAIN A DIRECTION FOR INITIATION OF PENALTY PROCE EDINGS. THE MEANING OF THE WORD DIRECTION IS OF IMPORTANCE. MERELY SAYING THA T PENALTY PROCEEDINGS ARE BEING INITIATED WILL NOT SATISFY THE REQUIREMENT. T HE DIRECTION TO INITIATE PROCEEDINGS SHOULD BE CLEAR AND NOT BE AMBIGUOUS. IT IS WELL SETTLED LAW THAT FISCAL STATUTES ARE TO BE CONSTRUED STRICTLY A ND MORE SO THE DEEMING PROVISIONS BY WAY OF LEGAL FICTION ARE TO BE CONSTR UED MORE STRICTLY. THEY HAVE TO BE INTERPRETED ONLY FOR THE SAID ISSUE FOR WHICH IT HAS DEEMED AND THE MANNER IN WHICH THE DEEMING HAS BEEN CONTEMPLATED T O BE RESTRICTED IN THE MANNER SOUGHT TO BE DEEMED. AS THE WORDS USED IN TH E LEGAL FICTION OR THE DEEMING PROVISIONS OF SECTION 271(1B) IS DIRECTION, IT IS IMPERATIVE THAT THE ASSESSMENT ORDER CONTAINS A DIRECTION. USE OF THE PHRASES LIKE (A) PENALTY PROCEEDINGS ARE BEING INITIATED SEPARATELY AND (B) PENALTY PROCEEDINGS U/S. 271(1)(C) ARE INITIATED SEPARATELY, DO NOT COMPLY W ITH THE MEANING OF THE ITA NO.144/COCH/2016 6 WORD DIRECTION AS CONTEMPLATED EVEN IN THE AMENDED PROVISIONS OF LAW. THE DIRECTION SHOULD BE CLEAR AND WITHOUT AMBIGUITY. T HE WORD DIRECTION HAS BEEN INTERPRETED BY THE DECISION OF THE APEX COURT IN THE CASE OF RAJENDRANATH REPORTED IN 120 ITR PG. 14, WHERE IT H AS BEEN HELD THAT IN ANY EVENT WHATEVER ELSE IT MAY AMOUNT TO, ON ITS VERY T ERMS THE OBSERVATIONS THAT THE ITO IS FREE TO TAKE ACTION, TO ASSESS THE EXCES S IN THE HAND OF THE CO- OWNERS CANNOT BE DESCRIBED AS A DIRECTION. A DIREC TION BY A STATUTORY AUTHORITY IS IN THE NATURE OF AN ORDER REQUIRING PO SITIVE COMPLIANCE. WHEN IT IS LEFT TO THE OPTION AND DISCRETION OF THE ITO WHETHE R OR NOT TAKE ACTION, IT CANNOT BE DESCRIBED AS A DIRECTION. 51. THEREFORE, IT IS SETTLED LAW THAT IN THE ABSEN CE OF THE EXISTENCE OF THESE CONDITIONS IN THE ASSESSMENT ORDER PENALTY PROCEEDI NGS COULD NOT BE PROCEEDED WITH. THE PROCEEDINGS WHICH ARE INITIATE D CONTRARY TO THE SAID LEGAL POSITION ARE LIABLE TO BE SET ASIDE. 12. THE AFORESAID JUDGMENT WOULD LEAVE NO MANNER OF DOUBT THAT THE PENALTY PROCEEDINGS IN THE PRESENT CASE WERE INITIATED CONT RARY TO THE SETTLED LEGAL POSITION AND HAVE TO BE SET ASIDE. 13. ACCORDINGLY, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED AND THE IMPUGNED ORDER IS QUASHED. WE ARE NOT GOING INT O THE MERITS OF THE IMPOSITION OF PENALTY AS WE HAVE HELD THAT THE PENA LTY PROCEEDINGS WERE INITIATED WITHOUT THE AUTHORITY OF LAW. THUS THE G ROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. ITA NO.144/COCH/2016 7 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 06-09-2016. SD/- SD/- ( . ) (GEORGE GEORGE K.) ( . . ) (B. P. JAIN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER & /PLACE: /COCHIN 2 /DATED: 6 TH SEPTEMBER, 2016 GJ/ 1 * (.3 43%. /COPY TO: 1. &' /CHICOO JOSEPH, ROSE VILLA, ALAPATT CROSS ROAD, RAV IPURAM, KOCHI-682 015 . 2. () &' /THE INCOME TAX OFFICER, WARD-2(2), KOCHI. 3. ,5 . ( )/THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCHI , 4. ,5 . /THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. 367 (. , /THE DR/ITAT, COCHIN BENCH. 6. 79 :- /GUARD FILE. 1, /BY ORDER ; /ASSISTANT REGISTRAR - .